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 large public perception problem. Banking discrimination was a hot topic at the XBIZ LA conference back in January where I was on the panel with other industry leaders. We thought since this issue impacted so many clients it was important to dive deeper into the topic. This month we’ll look at the challenges of this problem, where it all stems from, and what you can do about it.
The Law that Dug into the Industry
Much of the issue with banking discrimination comes from Operation Choke Point. It was implemented during the Obama Administration and 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 of the operation accused it 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 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 of 2017, the Trump Administration ended Operation Choke Point. However, that is little comfort to the many businesses that still feel its impact. Banks are not convinced that they can again serve these businesses without fear of threats or regulatory pressure. The end of the program didn’t end the stigma associated with Operation Choke Point or bring back the banking relationships that were terminated because of it. 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 (FSC) Executive Director, Alison Boden has made banking discrimination one of the organization’s top priorities. They have engaged with a Washington D.C. advocacy group called FS Vector (The Firm for Innovative Financial Services) to help gain the attention of congress on banking discrimination against the industry. Last December, members of the FSC and the adult community held meetings with both the Republican and Democratic staff members of the House Financial Services Committee. The audience was 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 in the past year alone. One way to help is to share your experience and take the survey at https://www.surveymonkey.com/r/L9JFMXQ.
The goal of the FSC is to ensure that our industry is protected in forthcoming legislation which 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. We give you our top seven to follow.
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 to the adult space. Wells Fargo and Bank of America are notorious for closing adult accounts.
The only way to change the 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 FSC as there is always power in numbers.