Despite End of Operation Choke Point, Firearms Businesses Still Face Financial Services Discrimination

Trump ended Obama's Operation Choke Point

By Adam Carlson

Being a gun dealer isn’t easy. Sure, the previous president (AKA The Greatest Gun Salesman of All Time) offered a sustained sales boom to gun dealers everywhere. But, over the last decade, internet sales have created clear winners and losers. The high volume/low-margin sales model of national dealers, such as Buds Gun Shop, hasn’t only cut into the sales of local gun shops, but they’ve also put downward pressure on their pricing power and profitability.

Of course, this is simply capitalism at work. And it’s a net win for consumers. But other recent forces acting against the firearms businesses can’t be explained away as the invisible hand of the market performing its normal function.

Rather, leftist bureaucrats and executives in both governmental agencies and in publicly-traded corporations have acted in bad faith to “choke” legitimate, legal firearms businesses from being able to operate (let alone profit and grow) by denying them access to the banking, lending and credit card processing services that businesses in other industries take for granted. This discrimination was originally brought to the mainstream media’s attention via eposes of Operation Choke Point.

A Short History

A 2013 initiative of President Obama and the Department of Justice, Operation Choke Point was a program designed to investigate banks and other financial institutions that did business with firearms dealers and other “suspect” industries. From its inception, the law received criticism from the right as a transparent attempt by the government to pressure the financial industry to cut off these companies’ access to banking services and capital, without first having shown that the targeted companies had violated the law.

In a pointed critique in the St. Louis Post-Dispatch US Rep. Blaine Luetkemeyer characterized the law this way:

“It’s a thinly veiled ideological attack on industries the Obama administration doesn’t like, such as gun sellers and coal producers.”

In practice, the law had the effect of dramatically increasing the regulatory and financial stakes for banks, lenders, and credit card processors to do business with the firearms industry. Consequently, for a period of about five years, most financial services firms simply stopped doing business with any gun-related business.

Thankfully, the groundswell of criticism against the law finally reached a point — and the election of Donald Trump resulted in a much more gun-friendly administration — that the program has been cancelled.

Despite its end, however, all has not returned to “normal” for firearms businesses.

Operation Chokepoint Legitimized Financial Discrimination In the Private Sector

Instead, Operation Choke Point, despite now being defunct, served to legitimize second class treatment of the firearms industry by those in corporate America who choose to do so based on personal ideology. As it turns out, the vast majority of corporate America’s leadership, even in the finance sector, leans left. Hard.

And corporate America still has the gun industry in their crosshairs.

Low Risk, High Risk, And “We Just Don’t Like You”

In theory, the mandate of a publicly-traded company is to maximize returns for their shareholders while operating within the law. In practice, the leading American public corporations are all too happy to sacrifice profits in return for the positive press they receive for pushing leftist social engineering goals.

For example, TTAG has previously reported on the anti-firearms agenda of Bank of America. But it’s not just BofA that wants to limit your natural, civil, and constitutional right to own a firearm (or buy or sell one). In fact, banks and financial services companies across the nation – particularly the largest ones – have taken a hostile stance against the gun business. In some cases, banks and credit card processors simply refuse to do business with firearms-related businesses outright.

Perhaps most nefariously, many large financial services companies like Intuit, Paypal, Stripe, or Square, “technically” prohibit firearms-related businesses from using their services in their fine print.

In practice, however, these firms regularly allow firearms businesses to utilize their services, but at the first sign of even a minor issue, such as the company’s first credit card chargeback, lo and behold, the service provider “discovers” that the firearms company’s use of their service violates their terms of service. The account and the business’s funds are then frozen, leaving the business in a serious cash crunch.

These large, anti-gun banks and financial services providers can’t claim their agenda is driven by risk management, profitability, or a non-political “business purpose.” The simple fact: firearms businesses are, as a group, one of the most profitable and least-risky industries from the perspective of a bank or financial services provider. Here’s why, in layman’s terms…

Most Sales Are Retail: For banks and financial services companies, the biggest financial risk is a client business that generates lots of credit card chargebacks. When it comes to chargebacks, however, retail businesses almost uniformly have lower chargeback rates than eCommerce businesses.

That’s because a cashier is generally going to “smell something fishy” better than an eCommerce shopping cart, so fraudsters tend to increasingly ply their craft online where they don’t have to deal with a person or security cameras. Given that the bulk of firearms industry businesses are still retail, as an industry, they are ipso facto lower risk.

Even eCommerce Firearms Sales Are Safe: Even for those firearms retailers that sell guns online, however, existing US law, which requires that eCommerce firearms purchases be picked up via a local FFL, means that eCommerce firearms sales are, surprisingly, often even more secure from the bank and credit card processor’s perspective than traditional retail sales.

FFLs, Generally, Are Highly Responsible Business Owners: Any American can build a website or open a storefront and be selling almost any type of widget tomorrow. That means, generally speaking, that the average American business is no more secure than the average American.

By contrast, only licensed FFLs have the right to retail firearms. That license comes only after an extensive application, background check and ongoing annual oversight. Collectively, these requirements mean that the average FFL is significantly more “upstanding” than the average retailer in an unregulated industry.

Moreover, FFLs know that the loss of their license due to a failure to, for example, check a customer’s age prior to completing a sale, would be devastating to their business. As a result, not only is the average firearms retailer more “accredited” than the typical American business, they also are highly incentivized to follow legal regulations in a way that the average business owner might not be.

Gun Purchases Are Document-Heavy Transactions: You can purchase almost any legal good in the United States in cash, without an ID and leave virtually no record of the purchase. Not so with firearms. FFLs are required to check two forms of ID as well as conduct a background check screening. Combined, these requirements have a dramatic effect on reducing credit card chargebacks and purchase fraud.

So from the perspective of banks and financial services companies, firearms businesses should be among their most profitable and least risky customers. Yet due to personal biases at the top of these corporations and discriminatory political calculations, most financial service providers and banks refuse to do do business with them.

Growth Of The B2B Firearms Industry

Given the ongoing hostility of much of corporate America towards the retail firearms industry even after the demise of Operation Choke Point, a new financial “niche” sector is growing. One that’s focused specifically on serving firearms industry businesses.

As firearm industry total revenue grows, it becomes large enough to sustain financial services providers and payment processing companies that specialize in firearms-related transactions. These businesses are typically owned and operated by 2A-friendly entrepreneurs, but more importantly, they derive most or all of their revenue from the consumer firearms industry. Essentially, these financial service providers are in the same boat as their clients.

This development should ultimately provide the gun industry with a more stable financial footing, as the firearms-focused providers have a vested interest in developing lasting partnerships with banks and other upstream financial services providers that will, in turn, create vested interests in those organizations to continue to support firearms businesses.

 

Scott Hawksworth writes for TacticalPay.com, a merchant services company that specializes in providing credit card processing for gun dealers and other businesses in the firearms industry.

comments

  1. avatar Sc says:

    Blame the AML consultants. They’re still advising their clients to shy away from the industry. They approach it from the perspective of why take the risk? The guidance was issued, and even though it was walked back, that doesn’t really change things. If a bank gets caught with a customer laundering money through firearms sales the regulators are going to crucify them. So that’s why their is still discrimination. Blame the consultants.

  2. avatar jwm says:

    It’s truly amazing. The gun grabbers want to do away with firearms. Their efforts have led to hundreds of millions of new guns and gun owners.

    And led directly to Trump getting elected which is changing the make up of the federal courts.

    99% of the guns of my youth were ‘Fudd’ funs. No ordinary citizen got a carry permit. And now we are awash in ebr’s and on the verge of constitutional carry nation wide.

    God bless the anti gun crowd.

    1. avatar Hank says:

      You make a great point. I remember the same. When I was a kid, everyone had guns, but it was ALL bolt/lever/pump, and ONLY for hunting. No one really even had pistols, and if they did it was a revolver, and they were probably a cop. No one ever carried a handgun or owned anything military type, it wasn’t even really available. Of course there was more WWII and soviet surplus back then but people mainly bought those as budget guns. I was considered a wierdo because I like surplus military guns and pistols. The past 20 years it’s all changed. You can’t throw a rock without hitting an AR or soneone carrying a glock anymore. It’s amazing. Everything they’ve tried to do has backfired.

      1. avatar jwm says:

        Not just backfired. Blew right up in their faces. And they still don’t seem to have a clue. I’m awed at the major stupidity.

      2. avatar Red in CO says:

        Wow, that’s crazy. I’m 22 years old, so that world was before my time, but damn. I wonder how much of that shift is due to just market forces and how much is the anti gun screeching?

        1. avatar jwm says:

          Red. In 1968 gun ownership really was dying out here. Everybody was moving to the city and folks that owned guns were farmers and hunters. The NRA wasn’t in politics. Then the dems rammed thru the 68 gca. That woke a lot of people up. Including me.

          Remember, this was before the 86 registry closed new machine guns off from the public. I could walk into a gun store in WV and buy a NIB Uzi sub gun for 350 bucks. Few people were buying them or AR’s. Before the iron curtain came down the only way to get Russian guns was as war trophies. I had a Viet Nam bring back TT-33 and swapped it for a new Colt .38 cause ammo was next to impossible to get for the commie gun.

          Now look. Except for a few places like CA and NY the rest of the country is shall issue and rapidly going constitutional carry. AK’s and AR’s every where.

          Even Illinois is shall issue. Things are changing for the better.

        2. avatar Hank says:

          Yeah, the gun controllers last chance to really get what they wanted was the latter half of the 20th century. By the time the AWB expired in 04, it was too late. That’s not to say they can’t make it happen some day, but the country is more awash in military type firearms than all of the worlds armies- combined. It sure is good to see. I think that’s why these days you see such a seething hatred of FUDDs. Back in the day they were A OK with selling out and just giving up. People talked as if one day there truly would be no more private ownership of firearms. People looked at you wierd of you talked about using a gun for self defense. No one ever kept a gun loaded. It was always in a case or a (very ineffective) glass cabinet. The only time people loaded guns is at the range or while hunting, and it showed. Even the SKS was thought of as an evil “assault rifle”. I think what changed all this was, as you mentioned, reaction from the GCA and later gun control bills, but I think the biggest factor has been the growth of concealed and open carry from the 80s until now. Also a huge influx of men from the Wars who wanted an AR of their own, helping to make the rifle popular, especially in their age group.

        3. avatar jwm says:

          Hank. Generally I agree. The biggest danger to gun rights now is the attitude amongst gun owners that CA and NY and NJ can go rot.

          But I honestly believe that the fed courts, up to and including the scotus are going to settle the issue in our favor.

          I don’t like Trump. But I’ll do everything I can to give him a second term.

        4. avatar Geoff PR says:

          Red – I’m convinced the anti-gun hysterics hurt them more than helped.

          Example – I’m in Florida. We were one of the first of the new-wave conceal-carry states in 1988 or so. The local newspaper was *literally* predicting blood in the streets, and gunfights over parking spaces.

          Then, *nothing* happened. Except the ‘gun crime rate’ went *down* by about 50 percent, tracking the national decline that happened in that same time period.

          The facts are on our side, but they won’t admit it…

        5. avatar TX_Lawyer says:

          I think things have been generally trending our way culturally, as y’all say. As to the whole AR thing, I think what did it was the AWB. Tell an American he can’t have it, then legalize it ten years latter. Go ahead and see what happens.

  3. avatar Hank says:

    Hmm. So there IS a global cabal of bankers and billionaires conspiring to harm the right to keep and bear arms. That, actually does kinda freak me out, just a little bit.

    1. avatar ironicatbest says:

      Global economy, global banking. Yes siree, it’s scary.

    2. avatar Raoul Duke says:

      Yes

      They also purposefully devalue your currency (ever since 1913 and the “Federal Reserve” (private bank), purposely run on debt-based economies, convince you to back their wars, import immigrants not only to divide and weaken the native populations but also to gain new debt slaves, lower wages, and keep housing prices high, oh and how could I forget the upkeep of the petrodollar. Libya and Iraq were toppled because they no longer traded in dollars. Guess who recently decided to stop that? Venezuela. Maduro hasn’t learned the lesson of what happens to weaker countries who don’t trade oil in dollars.

      Be prepared to hear the war drums to go to war against them even though I hate Commie shitbags I also say let them fall on their own plus with our 20 trillion dollar debt we can’t afford any more wars.

  4. avatar former water walker says:

    Preaching to the choir buddy. None of the credit squeeze effects me. I’ve bought my last 10 guns using layaway. We do use the Square in our antique/decorative junk business. Lots of “prohibited” businesses are creative in what they call their retail establishments…bombard Trump’s people for some equal justice!

  5. avatar Geoff PR says:

    “Scott Hawksworth writes for TacticalPay.com, a merchant services company that specializes in providing credit card processing for gun dealers and other businesses in the firearms industry.”

    Well, how about some wealthy conservative types creating a firearm-specific finance operation?

    If BoA wants to be assholes, found the ‘Bank of Caliber’ or whatever…

    1. avatar Red in CO says:

      According to the second part of the article, it sounds like that’s what’s happening. God bless the free market!

      1. avatar Jonathan-Houston says:

        You mean according to the second part of this product placement piece, that’s happening.

        While the author goes into detail on this topic, even identifying by name half a dozen anti-gun banks and credit card processing services, he names not even one of these new, niche firms catering to the firearms industry.

        Not in the body of the article, anyway. We get the information (read: advertisement) on his own financial services firm at the end. Just another sneaky trick by TTAG to trade on its credibility to make a buck.

  6. avatar FedUp says:

    “From its inception, the law received criticism”

    “Blaine Luetkemeyer characterized the law this way”

    You keep using that word, but I don’t think that word means what you think it means.

  7. avatar Alex Waits says:

    I wonder what would happen if BoA refused to finance a homosexual owned bakery…

  8. avatar ironicatbest says:

    All hell would break loose.

  9. avatar JW says:

    I think the left should be careful on the case of the wedding cakes. An enterprising attorney may make a connection using those precedents but involving the first and second amendment or the financial services sector and the first amendment they do not like.

    1. avatar TX_Lawyer says:

      The problem with your analogy is that in Colorado, there is a specific law protecting sodomites* from discrimination.

      *Honestly, I just like that word. It’s not entirely accurate because most heterosexuals engage in sodomy, and they aren’t protected by Colorado’s law.

  10. avatar #2a says:

    https://www.regulations.gov/document?D=ATF_FRDOC_0001-0035

    Comment if u like freedom and ur not a subject!

    Banned! Semi-autos,lever-action,pump-action,bolt-action,double barrel,single-shot guns then black powder…its all in the Anti-gun Bloomberg BAN ALL play book!

    UN-elected and appointed Department of Justice officials issuing a Notice of Proposed Rule-Making (NPRM) and BATF Regulatory Affairs, Enforcement Programs Services rewriting gun laws concerning what constitutes a NFA item or Machine-gun should worry everyone especially pro freedom people. Without our overwhelming input ..bump stocks and other devices of a gun could become banned or NFA items. Please help by sharing with all you know on all of ur platforms please! Its Very Important! Thanks!

  11. avatar matt o says:

    since when does an FFL ask for two forms of id?

    1. avatar Raoul Duke says:

      Unless you live in Virginia where you are required to at gun shows when buying from a dealer, I have never had that happen to me.

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