Will Operation Choke Point Affect Your Business?

If you’re not doing anything illegal, you shouldn’t have anything to worry about from the government. Concerns are running high with the introduction of the Department of Justice’s new “Operation Choke Point” initiative, however, after reports that otherwise legally compliant individuals in “morally questionable” industries are having their bank accounts shut down.

The genesis of this operation was an investigation of the payday loan industry that spanned all of 2011 and 2012. Four Oaks Bank of North Carolina was accused of knowingly processing checking account withdrawals made by payday lenders who were extending credit to customers without proper license and charging interest rates that were well in excess of what the law allows. They also allegedly processed payments for internet gambling and Ponzi schemes.

Four Oaks was the first bank to face a lawsuit under Operation Choke Point, and would eventually settle for $1.2 million without admitting wrongdoing. If the operation were limited to driving illegal and usurious lenders out of business, there would likely be very few complaints with it. However, public concern about the program was raised when an April 2014 article in VICE magazine suggested a link between a rash of unexplained closures of the accounts of porn stars and Operation Choke Point.

Banks don’t give reasons for these closures to the public, of course, so the link was entirely speculative on the part of the VICE writer. But the flames were fanned by op-ed pieces written by prominent bankers William Isaac (former FDIC chairman) and Camden Fine (president of the Independent Community Bankers of America), who both suggested that the DOJ was overreaching and targeting entire industries indiscriminately.

The DOJ has not made any formal declaration about the exact businesses Operation Choke Point is focused on, but speculation rests on a 2011 list of “high risk” industries published by the FDIC. The list contains some industries that are inarguably rife with illegal activity – cable box de-scramblers, drug paraphernalia, and Ponzi schemes, for example. But it also lists industries that do a lot of perfectly legal business – coin dealers, firearms sales, pornography, surveillance equipment and tobacco sales among them.

At this point, the connection between Operation Choke Point and anything except for the Four Oaks lawsuit is pure speculation. So how much cause for concern is there if you own or work for a business that the FDIC has tagged as “high risk”?

The FDIC’s original document from 2011 focuses almost solely on third-party payment processors and “remotely created checks”, which are payment authorizations that bear a signature that isn’t an original copy or do not have a signature at all. This was the primary point of abuse in the Four Oaks case. And while the FDIC was perhaps overly broad in naming some of these industries as “high risk”, it does nothing more than to advise banks to be more diligent in examining the account activity of payment processors associated with merchants who work in these industries. There is also still no direct evidence linking this list with Operation Choke Point.

Merchants who work in these industries will want to verify that their payment processor is reputable and operating entirely above board, but there is no evidence right now to indicate that businesses and individuals who are involved in the industries named by the FDIC need to worry about having their bank accounts shut down.

Why Your Business Needs Online Reputation Management

There once was a time when online reputation management services were considered superfluous and unnecessary. Many businesses thought the need to manage their online reputation was a bad business decision and something not worth investing in. Many of these businesses went about their daily business completely unaware of the power that the Internet had given to the average consumer.

With the advent of Twitter, consumers began to demand things of the businesses that they bought from. Large corporations were forced to become more transparent in their customer service dealing and small businesses were given the opportunity to prove themselves based on merit alone.Why Your Business Needs Online Reputation Management

When review sites like Yellowpages and Yelp hit the Internet scene, those companies that continued to ignore the need for online reputation management services began to suffer. More and more clients, customers and consumers filled these review sites with nasty, negative and revealing testimonials of these companies. The consumer empowerment revolution had started and those businesses caught ignoring the need for reputation management services suffered the most.

The Power Of Reputation

Why should you care what people say about you online? If you are busy running your business, why do you need to worry about what someone said about you on Yelp?

The answer to these questions lies in one of the most powerful selling tactics known to modern industry: social proofing.

Most consumers buy what their friends buy. This has been a long known fact in the business world, but what is it that makes it true? Without delving too much into the psychology of selling, let’s examine the why behind purchasing decisions.

Human beings are social creatures. It is the social nature of our species that has allowed us to adapt and overcome many obstacles. Deeply engrained in our natures is the need for social affirmation before we do anything. This need for social affirmation extends far beyond our friendly encounters with others, human beings make large life decisions, sometimes without regard to rationality, based solely on this aspect of social affirmation.

The same holds true for individuals making purchases and interacting with businesses online. Users want to “see” that others are socially affirming a business before they proceed. Just taking a look at the popularity of sites like Yelp shows you just how real and powerful social proofing is.

Managing Your Social Proof

One of the most powerful and easily recognizable examples of social proofing can be found in the restaurant industry.

How many times have you been to a restaurant simply because your friend said they liked it? Now think about how many times you have avoided a restaurant simply because of the reviews that you either read or heard about from your social circle.

Multiply this same example by the power of the Internet and mass connectivity, and you can begin to see the trouble that your business might be in if you start ignoring online reputation management.

Imagine running a business successfully in the offline world only to be run out of business simply because a few negative reviews were left on Yellowpages.

Managing your online reputation requires more than just having a profile on these review sites. Aggressive reputation management includes the act of collecting and updating positive reviews. Building your social brand and starting a stream of positive reviews.

To compete in today’s market you need the added edge of being online. In order to make sure that your online presence is one that builds your business and not one that tears it down, start taking action to managing your online reputation today!