“Financial censorship” is not a term with which most people are familiar. Indeed, the idea that people could be financially censored is a relatively modern one—one’s cash is just as good as another’s. The advent of credit cards has changed that assumption significantly, and to operate a business in the present day, it is a necessity that one must be able to process credit cards.[1] But while the forms of financial censorship are new, the concept is not, in principle, terribly distinct from blacklisting or other forms of boycott or conspiracy outlawed—perhaps ineffectually—by the Sherman Act.
Today’s financial censorship may take several forms. The most notorious, and perhaps the rarest, is the semi-open collusion of large financial institutions to institute private embargoes against individuals or corporations. The most famous of these incidents occurred when payment processors agreed to block all funding to WikiLeaks in 2010.[2] A similar occurrence, of far more partisan timbre, arose in late 2020 as banks collectively began denying financing to certain fossil fuel activities.[3] This caused the Office of the Comptroller of the Currency (OCC) to rapidly promulgate a rule, entitled “Fair Access to Financial Services” (“Regulation”).[4] After a brief comment period, the rule was finalized.[5] The partisan reaction to the regulation was dramatic, with commentators on the left characterizing it as a rule existing to “forc[e]banks to serve oil [and]gun companies”[6] and commentators on the right hailing it as a rule “ensuring banks won’t refuse service to conservatives.”[7] Two weeks later, the OCC, now under the Biden administration, “paused” the rule and has left it to languish ever since.[8]
Of course, despite the fierce partisanship around the rule, some saw it as a neutral victory, promoting the ideals that underlie the First Amendment.[9] Without seeing it in practice, we cannot know what its effects truly would have been—instrument of liberation or partisan bludgeon—or whether it would have had the potency and the backing to touch the more obscure forms of financial censorship. However, in practice, the modern financial censor does tend to have a subtler touch. For example, in the past two years, payment processors have exerted pressure on both Pornhub[10] and OnlyFans[11] to change their internal policies, with speculation at one point that OnlyFans would ban pornographic content entirely.[12] While some have described such changes as necessary to protect the interests of minors, both sites created policies banning content that was fully legal when performed by or between consenting adults.[13] PayPal has engaged in similar blacklisting of merchants and platforms hosting legal content.[14]
All of this is possible because of the functional duopoly on the payment processing industry possessed by two companies: Visa and Mastercard.[15] And although the Regulation was strongly favored by Republicans and opposed by Democrats, it was Democratic Senator Dick Durbin who, in remarks before the Subcommittee on Competition Policy, Antitrust, and Consumer Rights, observed that “Visa and Mastercard . . . are so dominant in the payments market that merchants couldn’t stay in business without using their cards.”[16] Indeed, Senator Durbin somewhat undersells the point: his primary concern is with what he sees as the exorbitant fees charged by the cards. But this leads us to our narrowest and subtlest form of financial censorship: this duopoly power has enabled MasterCard to develop and maintain a list of blacklisted merchants, called the MATCH list. The MATCH list has become an industry standard in the payments acquiring industry, to the extent that it has been termed a “black hole”: after one is added to it, there is no return or recourse.[17]
MATCH is a mandatory system for any payment processor accepting Mastercard.[18] And, while the system is maintained by Mastercard International, it is also used by Visa and American Express.[19] As such, anyone seeking to accept credit cards generally does so at the whim of the MATCH list. And its whimsy can cause problems.
First, the possibility for error is significant because the incentives are aligned in favor of censorship. Any payment processor that suspects a merchant of violating the terms and conditions of the Mastercard merchant agreement must add that merchant to the MATCH list, lest the payment processor be subject to a noncompliance assessment.[20] But there is no penalty for adding an innocent merchant to the list so long as a violation is “suspected.”[21] Mastercard themselves have made no commitment to verifying that any violation has occurred, appearing to take a laissez-faire approach.[22] Thus, there is a strong incentive for payment processors to err on the side of placing innocent merchants on the list.[23] Payment processors are similarly incentivized to place merchants on the list for narrow technical violations of the merchant agreement, or for a nominal level of chargebacks which otherwise would come within an acceptable level of risk.[24]
But perhaps most disturbing is the potential for non-erroneous censorship based upon speech. One rule—the violation of which can land a merchant on the MATCH list—is engaging in “Illegal or Brand-damaging Transactions.”[25] “Brand-damaging” here is grouped in with “illegal,” making this essentially the worst thing for which one can get added to the MATCH list—if one gets too many chargebacks, for example, one might still be able to find a high-risk payment processor that will allow one to operate a merchant account at a higher expense, but if one is added under this code, code 10, one is unlikely to find another processor at any price, even offshore.[26]
Thus, to preserve its brand identity, MasterCard has the as-yet legally unchallenged authority to ostracize merchants from the mainstream financial system. This behavior is not only undesirable, but also economically wasteful, leading to lost production—both for MasterCard and the merchants it bans. Yet, it is still preferable for MasterCard to engage in this wasteful behavior to avoid signaling a negative association that might cause it to lose more money in the longer term.
Counterintuitively, making this sort of financial blacklisting and coercion illegal—whether through regulation, antitrust, or the resurrection of common carrier principles currently in vogue regarding the regulation of social media platforms[27]—might very well be welcomed by MasterCard and the acquiring industry generally. A rule requiring payment processors to serve customers indiscriminately regardless of political beliefs, however repugnant, would likely be welcomed by financial institutions themselves. Financial actors benefit from the business of anyone with money who does not pose a significant actuarial risk. When financial actors are permitted to discriminate against those with repugnant beliefs, those actors must weigh the monetary benefits of accepting the business of a potential pariah against the costs of potential social backlash. But when financial institutions are not permitted to discriminate, that incentive vanishes, and banks and payment processors may act again in the way that rational economic actors would be expected to—and the way they would like to.
[1] See Rockaway Bev., Inc. v. Wells Fargo & Co., 378 F. Supp. 3d 150, 157 (E.D.N.Y. 2019) (plaintiff whose small business was victim of grand larceny by a third party was placed on the MATCH list, making them unable to find a credit card processor and allegedly diminishing their revenue by $5,000 per week).
[2] Banks and WikiLeaks, N.Y. Times (Dec. 25, 2010), https://www.nytimes.com/2010/12/26/opinion/26sun3.html.
[3] Rachel Frazin, Trump Administration Proposal Takes Aim at Bank Pledges to Avoid Fossil Fuel Financing, Hill (Nov. 20, 2020, 05:37 PM), https://thehill.com/policy/energy-environment/526956-trump-administration-proposal-takes-aim-at-bank-pledges-to-avoid.
[4] OCC Fair Access to Financial Services, 85 Fed. Reg. 75,262 (proposed Nov. 25, 2020) (to be codified at 12 C.F.R. pt. 55).
[5] Off. of the Comptroller of the Currency, News Release NR-2021-8 (Jan. 14, 2021) (“OCC Finalizes Rule Requiring Large Banks to Provide Fair Access to Bank Services, Capital, and Credit”); see also Off. of the Comptroller of the Currency, Fair Access to Financial Services Federal Register Notice of Final Rule (Jan. 14, 2021) (to be codified at 12 C.F.R. pt. 55), https://www.occ.gov/news-issuances/news-releases/2021/nr-occ-2021-8a.pdf.
[6] Sylvan Lane, Regulator Finalizes Rule Forcing Banks to Serve Oil, Gun Companies, Hill (Jan. 14, 2021, 09:19 AM), https://thehill.com/policy/finance/534197-regulator-finalizes-rule-forcing-banks-to-serve-oil-gun-companies.
[7] John Hirschauer, Democrats Pledge To Fight Trump Rule Ensuring Banks Won’t Refuse Service To Conservatives, Federalist (Jan. 19, 2021), https://thefederalist.com/2021/01/19/democrats-pledge-to-fight-trump-rule-ensuring-banks-wont-refuse-service-to-conservatives/.
[8] Jeffrey L. Hare et al., Office of the Comptroller of the Currency pauses Fair Access to Financial Services Rule, DLA Piper (Feb. 2, 2021), https://www.dlapiper.com/en/us/insights/publications/2021/01/occ-finalizes-rule-to-ensure-fair-access-to-financial-services/.
[9] Marta Belcher, New OCC Rule Is a Win in the Fight Against Financial Censorship, Elec. Frontier Found. (Jan. 19, 2021), https://www.eff.org/deeplinks/2021/01/new-occ-rule-win-fight-against-financial-censorship.
[10] Danny O’Brien & Rainey Reitman, Visa and Mastercard are Trying to Dictate What You Can Watch on Pornhub, Elec. Frontier Found. (Dec. 14, 2020), https://www.eff.org/deeplinks/2020/12/visa-and-mastercard-are-trying-dictate-what-you-can-watch-pornhub.
[11] Scott Nover, Why is OnlyFans Letting Financial Companies Lure It Away From Porn?, Quartz (Aug. 25, 2021), https://qz.com/2050359/onlyfans-blames-financial-companies-for-pivot-from-porn/.
[12] Jim Waterson, OnlyFans to Ban Adult Material After Pressure from Payment Processors, Guardian (Aug. 19, 2021, 4:10 PM), https://www.theguardian.com/commentisfree/2021/aug/28/onlyfans-scandal-platforms-banks-ban-sexual-content-sex-workers.
[13] Id.
[14] Joe Mullin, Following Copyright Law Should Be Enough—Even When Payment Processors Say It Isn’t, Elec. Frontier Found. (June 8, 2018), https://www.eff.org/deeplinks/2018/06/following-copyright-law-should-be-enough-even-when-payment-processors-say-it-isnt.
[15] See Datanyze, Payment Processing Software Market Share (accessed Sep. 27, 2021), https://www.datanyze.com/market-share/payment-processing–26.
[16] Competition Policy for the Twenty-First Century: The Case for Antitrust Reform: Hearing Before the Subcomm. on Competition Pol’y, Antitrust, and Consumer Rts. of the S. Comm. on the Judiciary, 117th Cong. (2021) (statement of Sen. Dick Durbin, Chairman, S. Comm. on the Judiciary).
[17] Paul A. Rianda, The Match List: No Return From Acquiring Industry’s Black Hole, ISO & Agent Wkly., Dec. 22, 2011, at 17,
[18] Mastercard Worldwide, Security Rules and Procedures: Merchant Edition 11 (Feb. 9, 2021), available at https://www.mastercard.us/content/dam/mccom/global/documents/SPME-Manual.pdf.
[19] Office of the Comptroller of the Currency, Comptroller’s Handbook: Merchant Processing 27 (2014) [hereinafter Comptroller’s Handbook].
[20] Mastercard Worldwide, Security Rules and Procedures: Merchant Edition 11.2.2 (Feb. 9, 2021), available at https://www.mastercard.us/content/dam/mccom/global/documents/SPME-Manual.pdf.
[21] Id.
[22] See Mastercard Worldwide, Security Rules and Procedures: Merchant Edition (Feb. 9, 2021), available at https://www.mastercard.us/content/dam/mccom/global/documents/SPME-Manual.pdf (lacking any mention of a verification process on the part of Mastercard); see also Hsin-Wei Luang, Everything You Need To Know About The MATCH List & Terminated Merchant File, Merchant Maverick (Mar. 24, 2020), https://www.merchantmaverick.com/learning-terminated-merchant-file-tmf-aka-match-list/ [https://archive.md/v9hlB] (noting that there was previously a disclaimer in §11 of Mastercard’s Security Rules and Procedures noting that Mastercard did not verify MATCH List entries made by acquirers).
[23] See Rianda, supra note 17.
[24] See, e.g., Comptroller’s Handbook, supra note 19.
[25] Mastercard Worldwide, Mastercard Rules 5.12.7 (Dec. 11, 2020), available at https://www.mastercard.us/content/dam/mccom/global/documents/mastercard-rules.pdf.
[26] See Hsin-Wei Luang, supra note 22; see also Didi Rankovic, Dick Masterson says Patreon Alternative New Project 2 is Closing After Getting Blacklisted by Mastercard, Reclaim the Net (June 28, 2020, 10:22 PM), https://reclaimthenet.org/dick-masterson-new-project-2-mastercard/.
[27] See, e.g., Biden v. Knight First Amendment Inst. at Columbia Univ., 141 S. Ct. 1220 (2021) (Thomas, J., concurring) (arguing in favor of making social media platforms common carriers in the manner of public utility companies).
