The Latest Front in Battling Hate Groups: Credit Cards

Payments and credit-card companies including American Express Co., Discover Financial Services and PayPal Holdings Inc. are booting dozens of individuals and groups associated with right-wing extremist movements off their systems following violence at a white-nationalists' rally in Charlottesville, Va.

The actions, many of which were taken after finding the websites had violated the financial firms' acceptable-use policies, make it more difficult for the groups to sell merchandise or raise donations from supporters. Racial-justice organization ColorOfChange.org and others have pushed payments companies to take a more aggressive role in policing the transactions that run through their systems.

In response to recent events, PayPal has revoked access from more than 40 websites that violated those terms, according to a person familiar with the matter.

Decisions to cut off access to white-supremacy groups have also been made by technology companies. Alphabet Inc. and GoDaddy Inc. revoked the hosting support for a neo-Nazi website and Facebook Inc. and Twitter Inc. have suspended accounts affiliated with white nationalists.

An AmEx spokesman said that the company has been reviewing a list of websites of hate groups compiled by Color of Change and that it found the majority don't accept its cards. It has sent cease and desist letters to the sites that are using its logo and is reviewing the sites that actually accept AmEx cards. The spokesman added that the company maintains "the right to terminate any merchant relationship that is harmful to our brand."

Franz Paasche, PayPal's senior vice president for corporate affairs and communications, wrote in a blog post Tuesday that the San Jose, Calif.-based company "will always remain vigilant and committed to ensuring that our platforms are not used to perpetuate hate and violence or racial intolerance."

Discover said in a statement that "in light of recent events" the company is "terminating merchant agreements with hate groups, given the violence incited by their extremist views." Roughly a couple dozen websites will likely be affected by Discover's move, according to a person familiar with the payments industry.

American Express, Discover and PayPal occupy two main roles in the payments industry: they issue consumer accounts that can be used to make purchases and handle the processing of payments for businesses . The second activity, known in the industry as "merchant acquiring," is what has come under more scrutiny in recent days.

When opening a new merchant account, a business agrees not to engage in a range of illegal activities. Some payments firms also prohibit their customers from legal activities that may carry higher risks, such as selling money orders or traveler's checks.

Hate groups that find they aren't able to accept credit card payments, however, can rebrand under different names, potentially allowing them to receive payments again until the acquirers terminate the relationship.

The violence in Charlottesville this past weekend hasn't prompted big changes to payments companies' acceptable-use policies. But it has called attention to websites that could be violating those terms.

Additionally, the networks through which credit-card transactions are routed, such as Visa Inc. and Mastercard Inc., say they have always taken a tough stance on hate groups that incite violence or illegal behavior. They use a mix of proprietary technology and monitoring to keep tabs on illegal activities.

However, the networks generally need to work with the merchant acquirers to pull the plug. Visa for example, working with acquirers, has been terminating relationships with extremist groups on an ongoing basis in a process that predates last weekend's events.

In March and May, the company received letters from Color of Change that identified names of websites that they find offensive. A Visa spokeswoman said "a number of these sites were engaging in illegal activities" or violated the terms of their banks' acceptable use policies and they are no longer able to accept Visa payments.

Some networks and acquirers say it is difficult to shut down payment processing due solely to distasteful comments on company or group websites. Rather, one of the most common grounds for stopping payment services, according to a major acquirer, is that a group misrepresented itself when it signed up for services. A firm also gets kicked off for encouraging illegal or violent behavior.

A Mastercard spokesman said the company reviewed a list of websites provided by civic leaders and others and is "shutting down the use of our cards on sites that we believe incite violence, as well as those who are wrongfully suggesting they accept our cards, when in fact they don't."

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com and AnnaMaria Andriotis at annamaria.andriotis@wsj.com

(END) Dow Jones Newswires

August 18, 2017 11:58 ET (15:58 GMT)