Chase won't process condom retailer's card payments

It seems far-fetched that a bank would refuse a retailer's business, but that is exactly what happened in the case of Lovability, an online retailer of condoms.

In mid-March, a division of JPMorgan Chase rejected an application to process payments for Lovability, citing "reputational risk" associated with "adult" products. After some bad press, however, a representative from Chase's marketing department said the company will reverse its decision.

"She told me there were federal regulations on what kinds of businesses they could work with," Lovability Owner Tiffany Gaines told Huffington Post. "I challenged her on what is in the prohibited area." In actuality, there are no federal regulations requiring payment processors to reject adult-themed product makers or retailers, or any other legal businesses connected to the adult industry, Huffington Post reported.

The real reason for the rejection is that banks, payment processors and lobbyists are trying to avoid money laundering schemes. A relatively new lobbying group called the Third Party Payment Processors Association has launched Operation Choke Point, which aims to curb money laundering by scrutinizing banks and payment processors that facilitate transactions with illegal businesses.

"There is no evidence that Chase declined Lovability's application to send a political message. But the episode highlights just how extreme the private sector reaction has been to a very basic law enforcement effort," according to the Huffington Post.

We understand that all banks will be on high alert after the massive card data breach that impacted Target (NYSE: TGT), Sally Beauty Supply (NYSE: SBH) and a host of other major retailers. However, JP Morgan Chase's decision was extreme. If there are concerns, why not investigate a retailer's business before turning down its application? There are adult product and birth control retailers of all types that are part of a multibillion dollar industry in this country. To throw roadblocks in the way of growing their businesses is extremely short-sighted.

For more
-See this Huffington Post article

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