Is Operation Choke Point Over?

The Washington Post writes, “FDIC attempts to end Operation Choke Point with letter, action.”  So is it?

Wow, what a coincidence?  Republicans take hold of the House and Senate and the financial witch hunt ends.  Obviously, this is good news.

“The FDIC is issuing this statement to encourage institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers,”

Operation choke point targeted businesses that the government deemed illegal, and in the process, cut off banking services to legal, licensed business such as:  payday lenders, gun retailers and ammunition merchants.

So, is ACH a good payment option for lenders?  Meh.  Nacha is proposing new rules:

  • Lower the return rate threshold that could trigger such inquiry for unauthorized debits from one percent to 0.5 percent.
  • Establish for the first time return rate thresholds of 3 percent for administrative returns (for example, debits returned for invalid account numbers).
  • 15 percent for overall returns.

I get the 15% rule at some level, but a charge back does not have any type of remediation  in place.  So, your customer reverses a legitimate payment and your in trouble.  As far as administrative returns, most bank information is entered in by the consumer.  How is that the lender’s fault?  I guess you can verify the account somehow, but it seems like a stiff penalty for something that is usually human error.


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