The companies that process your credit card payments are becoming the new arbiters of what you can see and buy. By threatening to withdraw their services, these financial behemoths have forced the removal of hundreds of legal products, including mature video games, from well-known digital storefronts. This gives a few unelected executives in a boardroom immense control over free commerce and expression. To address this, the Senate has proposed the Fair Access to Banking Act (S.401). While it may not solve the entire problem, it represents a vital move to rein in this power and protect a marketplace where legal goods can be sold without fear of censorship by a payment processor.

You may review the text of the bill on Congress's website.

The Gordian Knot of Financial Services

Few people understand how their credit cards work and many falsely assume their bank debit cards are direct transactions between their bank and the store they are buying from. There are many layers of abstraction, and up to six different companies can be involved in the process between you and the seller. Each of these steps represents a bottleneck and single point of failure, a chance for a meddling money handler to decide against your purchase.

These are:

  • The Issuing Bank, your bank who issued you your debit or credit card.
  • The Payment Gateway, which captures your card information at the point of sale.
  • The Payment Processor, which receives data, processes the request, and checks for fraudulent activity.
  • The Payment Facilitator (PayFac), which maintains relationships with the Acquiring Banks on behalf of many merchants.
  • The Acquiring Bank, responsible for underwriting merchants and settling transactions.
  • The Card Network, which is the network that connects the Issuing Bank to the Acquiring Bank, such as Visa or Mastercard, and also sets rules and standards.

Each of these companies maintains its own terms of service and each of them can block a transaction by themselves. Additionally, intermediary companies that handle card transactions are mutually and individually bound to the terms of every Card Network, so even if you never do business with Discover or American Express, you must still obey their rules if you want to accept Visa or Mastercard. For online businesses, there are no alternatives: you will do exactly what they want, or you will not do business at all.

If you are banned from processing payments, you will not be informed why or by which point of failure. "Risk management" is considered a trade secret in the industry. You have no right to know, you cannot sue to discover what has happened, and you also have no right to appeal. These are private companies and they can do whatever they want, even if it is not in the best interest of their customers.

Card networks have enjoyed no new competition since 1985. As far as consumers are concerned, there is no difference between an American Express and a Visa card, because their costs and penalties are offloaded to the merchants who have to let the gratuitous 3%+ transaction fees eat directly from their profits, while consumers are blissfully unaware of how their chosen payment method hurts the stores they buy from. Since merchants can't choose which card networks to accept, new competition does not even factor into how one network's censorship impacts them. Consumers already have their wallets full of debit and credit cards that are functionally the same: they have no reason to switch to a new or more fair network.

In this way, card networks and payment processors enjoy all the powers of a state-sanctioned monopoly with none of the downsides of a public-private utility. They can choose who they do business with, their customers and merchants have no real alternatives, and (unlike public utilities) they are not required to provide equitable access. They can block transactions for any reason, they can do so with impunity, and they have been doing so for decades.

What the Fair Access to Banking Act does

The bill sets rules for a variety of financial institutions (banks and credit unions), financial services (card networks and their partners), and digital wallet providers (like PayPal and Venmo). Its definitions are broad and encompass all relevant services.

Its legislative intent is to prevent these companies from denying service based on "political or reputational risk considerations." Financial services have historically blocked businesses for a myriad of political reasons, including: abortion clinics, gun stores, fossil fuel industries, pornography, and charities. Essentially, anything controversial could find itself completely cut off from payments overnight.

In theory, this law addresses that and requires all financial services and institutions provide services to all legal businesses and persons. They cannot discriminate based on their political or reputational risk.

In practice, the law only provides sufficient leverage against financial institutions (specifically banks and credit unions). Any FDIC members and NCUA members found to be in violation of the law would be banned from accessing the Automated Clearing House (ACH) network. This would effectively deny them the ability to transfer funds to and from other banks and is a very strong incentive to comply and work with their members before denying them services.

It does not, however, provide sufficient leverage against the payment networks and their partners.

What the act does not do

The law lacks teeth for the financial services doing the most harm: the payment networks and payment processors. Financial institutions (banks and credit unions) are not the issue. There are over 9000 such institutions accredited by the FDIC and NCUA. If you are kicked out by your bank, it is fairly easy to find another. Brick and mortar banks have healthy competition, and banks like Old Glory Bank have been started recently specifically to provide banking services to risky businesses.

Lets focus on payment networks. Section 5 states:

SEC. 5. Payment card network.

(a) Definition.—In this section, the term “payment card network” has the meaning given the term in section 921(c) of the Electronic Fund Transfer Act (15 U.S.C. 1693o–2(c)).

(b) Prohibition.—No payment card network, including a subsidiary of a payment card network, may, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, prohibit or inhibit the ability of any person who is in compliance with the law, including section 8 of this Act, to obtain access to services or products of the payment card network because of political or reputational risk considerations.

(c) Civil penalty.—Any payment card network that violates subsection (b) shall be assessed a civil penalty by the Comptroller of the Currency of not more than 10 percent of the value of the services or products described in that subsection, not to exceed $10,000 per violation.

Pay special attention to (c). The penalty for payment services violating this law is extremely weak and technically unenforceable.

  • Card networks are on the hook for only 10% of the damages they have provably inflicted.
  • The penalty is capped at $10,000 per violation. Visa alone processed $16 trillion in 2024.
  • The penalty is imposed by the Office of the Comptroller of the Currency, at their discretion. They are not required to impose a penalty, and they are not required to impose the maximum penalty.
  • In 2024, the Supreme Court in SEC v. Jarkesy ruled that agencies often cannot try cases before Administrative Law Judges (ALJs), so OCC cannot use ALJs to impose penalties and would need to file suit in federal courts and take each violation to a jury trial. Getting the OCC to impose penalities for any violation would be difficult, but with this added cost it would almost never be worth it for them to pursue a case against a card network.

What the act should do

The issue of payments is by its nature financial. To make the economic penalties effective enough to deter censorious behavior, there must be relief available directly to those impacted by the actions of the card networks and their partners.

For instance, the Bill should:

  • provide civil relief to injured parties, allowing them to sue in federal court without permission from a regulatory body,
  • provide punitive damages on top of the full value of the services or products denied, and
  • provide for attorney's fees and costs to the injured party should they prevail in court.

These would significantly shift the balance of power away from the card networks and their partners and back towards the legal businesses that they serve. Card networks would be heavily incentivized to work with their customers, provide human support, offer transparent appeals processes, and endeavor to quickly resolve disputes out of court before damages mount up. That is what Americans deserve.

Support this Bill, Encourage Your Representatives

Contact both your Senators. Senators represent your state at-large and you have a right to contact both. Encourage them to support S.401 and to strengthen it by adding the provisions mentioned above.

Contact your House of Representatives member. S.401 is a Senate bill, but the House of Representatives can also introduce similar legislation. Encourage your representative to support the Fair Access to Banking Act and to advocate for stronger protections for consumers and businesses.

If you are a merchant or consumer who has been impacted by the misbehavior of the financial services industry, share your story with your representatives.

Many people believe that writing their representatives is futile, but they do take note of what things people are writing about. Their jobs are very comfortable and very profitable, so they want to keep them.

Thank you for reading.