One of the biggest challenges we face in our industry is the inability to obtain banking facilities to operate a business. The adult industry is a constant target and is considered by many to have unstable business practices. While this is not true, it is a major public perception problem.
Banking discrimination was a hot topic at the XBIZ LA conference back in January, where I was on a panel discussing it with other industry leaders. Since this issue impacts so many clients, we thought it was important to dive deeper into the topic. This month, we’ll look at where this problem stems from, the challenges it presents and what you can do about it.
The only way to change public perception of the adult space is to take the high road with everything. Make sure your business practices are on the up and up.
The Law That Dug Into the Industry
Much of the issue with banking discrimination is a result of Operation Choke Point. Implemented during the Obama Administration, this program targeted more than 30 merchant category codes, classifying them as high-risk. These included firearm sales, payday lending, dating, pornography, pharmaceutical sales, escort services, gambling, lottery sales and more.
Critics accused Operation Choke Point of bypassing due process, and argued that the government was pressuring the financial industry to literally cut off companies’ access to banking services. This included access to capital, and banks did this without having to show that the targeted companies violated the law. Operation Choke Point has also been accused of being harmful to sex workers and to those who manage almost any businesses in the adult space. Many report having their accounts shut down after years of operating smoothly. This has led to financial hardship and is considered a form of banking discrimination.
In August 2017, the Trump administration ended Operation Choke Point. However, that is little comfort to the many businesses that still feel its impact. The end of the program didn’t end the stigma or bring back the banking relationships that were terminated, as banks are not convinced that they can again serve adult businesses without fear of threats or regulatory pressure. People in the industry still face higher fees, censorship and credit card usage issues. Unfortunately, the adult industry still relies on a number of major banks’ acceptable use policy and from time to time, the large banks will comb through their portfolios looking for adult merchants and content creators to close them out. Operation Choke Point may be gone but its effects will follow businesses around for years.
Fight for Our Rights
As an industry, we need to fight for our rights. The Free Speech Coalition’s executive director, Alison Boden, has made banking discrimination one of FSC’s top priorities. The organization has therefore engaged with a Washington, D.C. consulting and advocacy group called FS Vector, to help gain the attention of congress on banking discrimination against the industry.
Last December, FSC and members of the adult community held meetings with both Republican and Democratic staff members of the House Financial Services Committee, who were surprised to learn of the discrimination against the adult community and asked for more information. Over the past few months, FSC has been gathering data to share with Congress about the impact of banking discrimination on our industry. The numbers collected are staggering. Nearly two out of three adult industry members have lost access to an account or financial tool, almost half of those in the past year alone. One way to help is to share your experience and take the survey at surveymonkey.com/r/L9JFMXQ.
The goal of the FSC’s campaign is to ensure that our industry is protected in forthcoming legislation that would require banks to rely on impartial risk assessments rather than politicized discrimination when providing their services. This bill would stop banks from becoming advocacy groups that ignore their clients’ constitutional protections and business interests. As the FSC continues to fight on behalf of the industry, there are several things you can do to maintain your banking relationship.
Seven Steps to Maintain Your Banking Relationship
- Seek out a bank that is comfortable in the adult space. This could be a regional or local bank.
- Establish a relationship with a local branch of a larger bank. Getting to know them personally can help.
- Look into small community banks that are trying to grow their business to compete with larger banks.
- In the EU, there is a regulated designation of e-money institutions. These can cost a little more than a bank, but they are typically more comfortable with the adult space.
- Limit your small payments to affiliates and content coordinators. If you have a lot of outbound payments due, try to utilize the services of third parties, such as ACH providers like Actum Payments. Lots of small and different payments will cause your accounts to be reviewed by the bank’s risk team.
- Reach out to the FSC. They have established a few partner banks in the U.S. to help serve our industry.
- Stay away from large credit institutions that are known to be problematic for the adult space. Wells Fargo and Bank of America are notorious for closing adult accounts.
The only way to change public perception of the adult space is to take the high road with everything. Make sure your business practices are on the up and up. Lastly, speak up and join the fight with the Free Speech Coalition, as there is always power in numbers.
Cathy Beardsley is president and CEO of Segpay, a merchant services provider offering a wide range of custom financial solutions including payment facilitator, direct merchant accounts and secure gateway services. Under her direction, Segpay has become one of four companies approved by Visa to operate as a high-risk internet payment services provider. Segpay offers secure turnkey solutions to accept online payments, with a guarantee that funds are kept safe and protected with its proprietary Fraud Mitigation System and customer service and support. For any questions or help, contact sales@segpay.com or compliance@ segpay.com.
