WASHINGTON, D.C. – Early last week The Daily Signal posted an article about an online knife manufacturer that was denied service from a major U.S. bank because the company sold its products online.
As reporter Kelsey Harkness tells it, Hogue, Inc., a knife manufacturer headquartered in California, received a call from Wells Fargo informing the small company that the megabank would not provide services because Hogue’s business was too risky.
When The Daily Signal, a publication owned by The Heritage Foundation, reached out to Wells Fargo, the bank confirmed that it doesn’t provide services to companies that sell weapons online because of the “risks associated with processing these transactions.” It was this response that lead the publication to question whether the bank’s decision resulted from the Federal government’s program “Operation Choke Point,” which the conservative Breitbart News originally reported as an Obama Administration effort targeting payday lenders.
But when PBN investigated, the bank’s response raised an entirely new set questions.
While spokesperson Angenette Maniego Lau provided PBN the same statement The Daily Signal received, the publication received an additional line that didn’t appear in Harkness’ story, “We have had long-standing relationships with gun and weapons manufacturers and those relationships continue despite the misinformation in the marketplace.”
When asked to clarify that statement and what risks a small knife company poses to Wells Fargo, the 27th largest company on the Fortune 500, Lau refused to explain.
When asked to name the gun and weapons manufacturers the bank does business with, Lau said the information was proprietary unless the customers allowed the bank to release their information. She promised to ask the bank’s weapons manufacturing and retail customers for permission to disclose their relationships with Wells Fargo.
Now a week later, Lau has not replied with an update.
However, in her original response, she did freely volunteer that the National Rifle Association was a customer of Wells Fargo, which is interesting considering that the NRA also sells knives and other bladed weapons online.
Last week, we reached out to Wells Fargo again and asked Lau to explain the difference between Hogue and the NRA, she has not responded.
Last week, we also e-mailed the NRA for their response, and they have not responded either.
Furthermore, we asked for comments from several weapons manufacturers and retailers that PBN readers are familiar with – Academy Sports and Outdoors, Bass Pro Shops, the National Shooting Sports Foundation, Lansky and others. All either did not respond to requests for comment or refused to comment.
Kim Calahan, a representative for Steel Will knives said her clients didn’t want to give a comment. “They want to focus on the positives of the industry and their products. ”
Which leaves us wondering: are the companies afraid the Federal government, and the big banks, will target them if they speak out? Did the NRA give the bank permission to disclose the relationship? Why would the NRA do business with a bank that denies service to legitimate, legal weapons manufacturers?
And finally, if Wells Fargo is doing business with weapons manufacturers and retailers, including the NRA (a favorite target of the Left), why target Hogue? Is it because they’re small and won’t fire back with the same impact as the NRA?
These are all fair questions that only Wells Fargo can answer.
PBN certainly supports the right of any legitimate and legal survival business to have access to banking services.
But if the charges made by The Heritage Foundation, members of Congress and several national media outlets are true that the Obama Administration is using “Operation Choke Point” to target businesses it doesn’t like, this is a sinister policy by a government that should work for all of the American people.
Stay tuned. PBN intends to follow this story.
Here’s the original, full story from The Daily Signal:
A major knives manufacturer from central California says his company was denied access to an internet payment processing service because they sell weapons online, raising questions about whether an anti-fraud program called Operation Choke Point is continuing to block legal businesses in the firearms and weapons industries from accessing basic banking services.
“It was pretty simple and straightforward,” Aaron Hogue, co-owner of Hogue Inc., said of the situation he faced with Wells Fargo bank. “They called my controller, and said, ‘Sorry, but we’re not going to be able to process any credit card transactions for the sale of weapons online.’”
“And they specifically said because you guys sell knives,” he added.
Hogue Inc. is a family-run business that sells knives, tactical gear, and firearms accessories online. The company was founded in 1968 by Hogue’s father, and has since grown to 275 employees. Although Hogue Inc. is involved in the firearms industry, it doesn’t sell any guns.
Wells Fargo, the bank that denied Hogue service, confirmed it doesn’t offer payment services to retailers that sell weapons online.
“We provide payment services for businesses across a wide-range of industries, including brick-and-mortar retailers that sell weapons, firearms, and ammunition,” Angenette Maniego Lau, a spokeswoman for Wells Fargo, told The Daily Signal via email. “For those retailers that sell weapons, firearms, related accessories, and ammunition online, we do not offer payment services due to the risks associated with processing these transactions.”
Maniego Lau did not respond when The Daily Signal inquired about the nature of “the risks” associated with the knives industry.
Norbert Michel, an expert in financial regulations at The Heritage Foundation, said the situation “sounds exactly like Operation Choke Point.”
“From a bank’s point of view, it’s supposed to be risky doing business with someone who doesn’t pay back their loan or overdraws their account,” Michel said, adding:
“I’m not aware of any data showing that weapon manufacturers have extraordinarily high default and overdraft rates, and even if such data exists the bank should be more worried about the individual customer. This sounds exactly like Operation Choke Point to me, and the only real risk is that federal regulators will make a bank’s life miserable for political reasons.”
Operation Choke Point is a program designed by the Justice Department in 2012 to fight fraud, but since then, has come under fire for targeting entirely legal industries by labeling them “high risk” for fraud. In doing so, government regulators sent the message to banks that these industries—such as firearms and ammunition sellers—were too risky to do business with. Firearms dealers have complained for years about a lack of access to financial services, but many said it got especially bad in 2013, when Operation Choke Point went into full swing.
The Daily Signal has documented several cases of small business owners who operate in these “high risk” industries who, because of their industry, lost access to the banking system.
Because Wells Fargo wouldn’t clarify its statement, it is unclear whether the bank’s decision not to do business with online weapons dealers such as Hogue Inc. is the result of internal policy or the bank’s government regulators.
Doug Ritter, founder of Knife Rights, an advocacy group located in Gilbert, Arizona, said either way, the decision makes no sense.
“From a banking business perspective, there’s nothing that I’m aware of that suggests that sellers of knives over the internet is any riskier for fraud than any other commonplace tool,” Ritter told The Daily Signal over the phone.
“If their concern is essentially political and they have made a decision that they don’t want to do business with people who sell knives, how do they differentiate knives as weapons that they feel is undesirable and knives as tools which millions of American use every day at home, at work, and in recreation? I don’t see them telling a retailer like Williams-Sonoma that they’re not going to process their credit cards because they sell knives.”
Hogue, who has since withdrawn a private savings account he maintained at Wells Fargo for a decade, said he’d be “very interested to know where the root is.”
“It’s either coming from the government, or it’s coming from a liberal element of the internet infrastructure,” Hogue said.
The Daily Signal sought comment from the Office of the Comptroller of the Currency, which regulates Wells Fargo bank. U.S. banks are required to have state or federal regulators, which are responsible for supervising and providing guidance regarding banks’ handling of a range of issues, from fraud prevention to anti-terrorism policies.
“As a general matter, the [Office of the Comptroller of the Currency] does not direct banks to open, close, or maintain individual accounts or particular customers and has provided no guidance to bankers that would result in the decision to avoid banking an entire industry,” a spokesman for the agency said.
“Banks must have adequate controls in place to manage the risks for their products and services and are expected to assess the risks posed by customers on a case-by-case basis and to implement controls to manage the relationship commensurate with the risks associated with each customer.”
In the case of Wells Fargo, it appears the bank isn’t managing its risk on a case-by-case basis, but rather, by entire industries. In April, Michael J. Bresnick, who previously served as executive director of President Barack Obama’s Financial Fraud Enforcement Task Force, under which Operation Choke Point was created, confronted the issue of “mass de-risking” based not on individual cases, but rather, on entire industries.
“Unfortunately, as the [Operation Choke Point] investigations continue, so too have one of the unintended but collateral consequences of such vigilance: mass de-risking,” Bresnick wrote in the American Banker. “Members of the industry have raised their hands in frustration and simply avoided lines of business typically associated with higher risk. This reaction to [the Justice Department’s] enforcement initiative, and similar matters brought by the Federal Trade Commission and the Consumer Financial Protection Bureau, is certainly understandable.”
Bresnick added that only until the government is willing to own up to the consequences of Operation Choke Point, “can we expect that the multitude of good actors who desperately want to avoid the last resort of de-risking will be able to do so with relative comfort.”
For Hogue, unlike some other small business owners, the situation with Wells Fargo isn’t going to hurt his business. Hogue already had access to a payment processing service through Chase Bank, and said it was Wells Fargo that approached him with a “sharp deal” that was supposed to save him “about $60,000 per year.”
Losing that deal won’t come at a cost—at least not for Hogue Inc., he said.
“It’s not really affecting us particularly. We’re just staying with our current credit card provider,” Hogue said. “It’s their loss, not ours.”
After the situation unfolded, Hogue posted about being denied service online, and his post received more than 500 responses.
(The original post read:) “THIS JUST IN: We were just informed that Wells Fargo Bank would not do business with us, refusing to provide their services based on the fact that we manufacture “weapons” (aka knives). Incredibly, this refusal came after THEY initially pursued us to gain our business. Once we had decided to go with Wells Fargo, they then pulled the plug saying they could not provide their services since we manufacture weapons…Needless to say, we are shocked and confused – considering their logo is a stagecoach and driver with a shotgun too! We felt we needed to inform the firearm and knife community of this discriminatory stance Wells Fargo has taken. Please share…”
Maniego Lau of Wells Fargo called the Facebook post “inaccurate” but would not provide any additional details.
Several of those who responded said they’d be changing banks.
“Switching,” one commenter wrote. “Wasn’t crazy about some of their practices before but it’s a hassle to change banks. Now without a doubt I’m gone.”
Hogue said it’s a “private decision” whether customers leave Wells Fargo, but doing so might be their only option to fight back.
“I chose to take our money out of Wells Fargo,” he said. “I think that that’s the only way that the law-abiding folks that are firearms owners, or even knives [sellers], can send a message.”
The policy of denying them service, he added, “is somebody’s idea of putting a damper on the firearms industry. That’s for sure.”