Apparently suffering from an attack of sudden-onset common sense, the FDIC issued revised guidance last week on payment processor relationships that eliminated the concept of "targeted businesses" that the FDIC considers to present a heightened risk of consumer fraud. As we disccussed in January, among the "targeted" companies were not only the usual suspects, like payday lenders and telemarketers, but such head scratchers as online dating services. We assume that the FDIC was shining a spotlight on illegal "escort services" that often act as a front for prostitution, but in its customary "why use a jeweler's awl when a sledgehammer will do" approach, it cast a wide net around otherwise legal businesses.
In its press release accompanying the revised guidance, the FDIC accused the rest of the world of failing to grasp its nuanced approach to making the world safer through social engineering.
The lists of examples of merchant categories have led to misunderstandings regarding the FDIC's supervisory approach to TPPPs, creating the misperception that the listed examples of merchant categories were prohibited or discouraged. In fact, it is FDIC's policy that insured institutions that properly manage customer relationships are neither prohibited nor discouraged from providing services to any customer operating in compliance with applicable law. Accordingly, the FDIC is clarifying its guidance to reinforce this approach, and as part of this clarification, the FDIC is removing the lists of examples of merchant categories from its official guidance and informational article.
Apparently, bankers are too dense to understand the FDIC's guidance's "original intent," and so, like Antonin Scalia does with US Constitution, the FDIC issued "Payment Processor Relationships For Dummies" so that the Alfred E. Neumans among the proletariat would finally get it through their thick skulls that the FDIC will not, ever, tell you in advance that a line of business is problematic. Instead, they'll wait until your next examination and then bitch-slap you for serving any members of the "non-targeted" group. That way, Jeb Hensarling can't smack them on the behind like a non-housebroken puppy with a rolled-up copy of their written "guidance" (which, as the FDIC repeatedly asserts, is "not binding like an actual regulation"). It's the way of the regulatory world in the era of "All Fired Up! Ready to Go!"
We're sure that the fact the previous version of the guidance that listed targeted businesses provided one of the bases for the lawsuit filed against the FDIC, OCC, and FRB in June by payday lenders and a trade group had absolutely nothing to do with this recent "clarification." Perish the thought!
In response to to all of this, I echo the immortal sneeze of John "Bluto" Blutarsky.