Transparency for payment processors

Recently, PayPal released an update to its terms of service stating that it would fine people who use its service to spread disinformation. It suffered an immediate backlash from free speech on social media. Former PayPal president David Marcus tweeted that this policy was against everything the company believed. He seemed to think it was “madness” for payment companies to refuse service “if you say something they disagree with”. Elon Musk tweeted the deal about him.

The company quickly reversed, saying the release was a mistake.

But the controversy led libertarian lawyer Eugene Volokh to take a closer look at PayPal’s terms of service and was horrified to find that PayPal has a long-standing acceptable use policy that prohibits “the promotion of racial or other intolerance. forms of discriminatory intolerance “. As a good First Amendment advocate, he stressed that “harsh criticism of a religion or government officials could be interpreted as promoting hatred and could theoretically violate that policy.” To protect himself from this danger and to protest this form of censorship, he closed his PayPal account and urged others to do the same.

Good luck finding an alternative. The reality is that payment companies have always had acceptable usage policies, and for good reason.

For one thing, they have a legal responsibility to stop money laundering and terrorist financing. So, they need to know who their customers are and what they are spending their money on. They also have a specific legal obligation to block illegal internet gambling transactions. Payment companies also have policies against using their systems for illegal transactions, and most of them take special precautions against copyright infringement and child pornography.

Beyond these legal issues, payment systems restrict who they do business with for ethical and brand reasons. Amex does not allow pornographers to use its services, even if pornography is protected by the First Amendment. Neither Stripe, Amazon Pay or Square.

Visa and Mastercard allow partner banks to provide services to legal pornography merchants, but they also allow banks to refuse this activity, and many of them do. This tolerance has its limits, however. Payment networks recently severed ties with Pornhub after revelations that it didn’t do much to check the depictions of rape on its site.

Both payment systems have extensive brand protection clauses in their contracts with merchants and banks. They may withdraw the service from “brand damaging” transactions and reserve the right to unilaterally define what such transactions are.

Some of these payment company restrictions seem idiosyncratic, to say the least. Amazon Pay, for example, will not pay for “hidden services”. So, witches and sorcerers stay away!

But many of them seem to be right. In particular, hate speech bans that mimic those of PayPal. Amazon Pay bans “hate literature”. Square rejects “hate or harmful products”. Swipe prohibits a company or individual “who engages, encourages, promotes or celebrates illegal violence against any group based on race, religion, disability, gender, sexual orientation, national origin or any other immutable characteristic”.

Visa and MasterCard may ban such merchants as part of their brand protection programs, even without an explicit ban. Which reputable company would like to be associated with companies or groups that promote hate speech? Responsible payment card companies avoid contact with these people and are right to do so.

Of course, the application can often be controversial. In 2019, PayPal enforced its hate speech policy against Gab and Infowars, which led to cries of censorship from conservative activists. But the displeasure to some critics comes with the territory. Disputes over applying standards are an inevitable part of being in the payments industry.

I talked about these issues with former National Security Agency general counsel and current Steptoe & Johnson partner LLP Stewart Baker on his Cyberlaw podcast on October 17 (around 32:40). He is more suspicious of payment card hate speech standards than I am, but we agree that a good step forward would be transparency. Payment card companies should be required to disclose their standards, explain their disconnection decisions, and provide adequate opportunities to challenge them.

Laws that provide for this type of transparency for social media companies are already in place in some states of the United States and in Europe. Existing financial regulations should be supplemented to require similar transparency rules for payment card companies, which must be enforced by powerful regulators who already control financial institutions.

Transparency has another advantage. It may reveal government pressure behind the scenes on credit card companies to discontinue service. Apparently this happened in December 2010, when Wikileaks began releasing the content of confidential diplomatic cables. Senator Joe Lieberman, then chair of the Senate Homeland Security Committee, publicly called on card companies to disconnect Wikileaks. But PayPal said it received covert pressure from the State Department. Visa, MasterCard and PayPal soon suspended Wikileaks accounts.

Government agencies should not put dark pressure on payment companies to disconnect disadvantaged companies and groups. A little sunlight on such hidden agency thrusts would be a good disinfectant, and the transparency requirements would provide it.

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