Regulation of acceptance of payment system instruments, credit cards, or fund transfers for internet-distributed products and services harmful to minors

(a)

In general

Chapter 53 of title 31, United States Code, is amended by adding at the end the following:

Regulation of funding of internet-distributed products and services harmful to minors

5371.

Definitions

For purposes of this subchapter, the following definitions shall apply: (1)

Authorized Internet payment processing business

The term authorized Internet payment processing business means any Internet payment processing business that— (A)offers a regulated payment system for use by sellers of any Internet-distributed age-restricted product or service; (B)facilitates any regulated transaction; and (C)is certified by and registered with the Office of Electronic Funding Oversight as provided in section 5372. (2)

Authorized money receiving business

The term authorized money receiving business means any financial institution that— (A)is subject to the provisions of subchapter II of chapter 53 of title 31, United States Code; (B)receives monies from consumers in connection with the operation of any regulated payment system; (C)facilitates the electronic transfer of funds from a consumer’s money market, checking, or savings account into a designated Internet payment account; and (D)has physical properties within which an interactive age verification process can be executed by an independent second party. (3)

Designated Internet payment account

The term designated Internet payment account means a financial account— (A)that is managed by an authorized internet payment processing business; (B)from which funds may be drawn electronically to pay for an Internet-distributed product or service harmful to minors; (C)that holds funds that are received from the account owner by an authorized money receiving business; and (D)that is owned by an individual whose identity and age have been verified at least one time by an independent second party. (4)

Director

The term Director means the Director of the Office of Electronic Funding Oversight of the Department of the Treasury, established under section 5373. (5)

Financial institution

The term financial institution means a State or National bank, a State or Federal savings and loan association, a mutual savings bank, a State or Federal credit union, or any other person who, directly or indirectly, holds an account belonging to a consumer or business. (6)

Independent second party

The term independent second party means any person who is employed by a private business and trained to verify the identity and age of a consumer using a valid government-issued identification card or equivalent identifying documentation bearing the consumer’s birth date or indication of age, which is presented by the consumer at the request of such person. (7)

Interactive age verification process

The term interactive age verification process means any age verification process employing any sequence of actions by which a consumer’s identity and age are verified by an independent second party at the time funds are first added to a designated Internet payment account. (8)

Internet

The term Internet means the international computer network of interoperable packet switched data networks. (9)

Internet-distributed product or service harmful to minors

The term Internet-distributed product or service harmful to minors means any product or service that— (A)is harmful to minors; and (B)is offered for sale over the Internet. (10)

Internet payment processing business

The term Internet payment processing business means any payment processing business that facilitates the settlement of payments by any means between— (A)any bank, credit card, or other financial institution account of a consumer of Internet-distributed products or services; and (B)any financial institution account, domestic or foreign, controlled by the seller of the Internet-distributed product or service. (11)

Minor

The term minor means an individual who has not attained the age of 17. (12)

Office

The term Office means the Office of Electronic Funding Oversight of the Department of the Treasury, established under section 5373. (13)

Payment processing business financial institution

The term payment processing business financial institution means any financial institution that holds an account belonging to an Internet payment processing business. (14)

Product or service harmful to minors

The term product or service harmful to minors means— (A)any picture, image, graphic image file, or other visual depiction that— (i)taken as a whole and with respect to minors, appeals to a prurient interest in nudity, sex, or excretion; (ii)depicts, describes, or represents, in a patently offensive way with respect to what is suitable for minors, an actual or simulated sexual act or sexual contact, actual or simulated normal or perverted sexual acts, or a lewd exhibition of the genitals; and (iii)taken as a whole, lacks serious literary, artistic, political, or scientific value as to minors; (B)any beverage in liquid form which contains not less than 0.05 percent of alcohol by volume and is intended for human consumption; (C)any tobacco product, as such term is defined in section 5702 of the Internal Revenue Code of 1986 (26 U.S.C. 5702); (D)any prescription drug product, as such term is defined in section 735 of the Federal, Drug, and Cosmetic Act (21 U.S.C. 379g); and (E)any other product or service determined to be harmful to minors by the Attorney General of the United States. (15)

Regulated payment system

The term regulated payment system means any Internet payment processing system or method utilized by any seller of any Internet-distributed age-restricted product or service that involves the settlement of payments between the seller and the consumer of such product or service. (16)

Regulated transaction

The term regulated transaction means any transaction or transmittal involving any credit, funds, instrument, or proceeds described in any paragraph of section 5374 which the recipient is allowed to accept under section 5372. (17)

Restricted transaction

The term restricted transaction means any transaction or transmittal involving any credit, funds, instrument, or proceeds described in any paragraph of section 5374 which the recipient is prohibited from accepting under section 5374. (18)

Sexual act; sexual contact

The terms sexual act and sexual contact have the meanings given such terms in section 2246 of title 18, United States Code. (19)

Secretary

The term Secretary means the Secretary of the Treasury.

5372.

Age verification requirement for internet payment processing businesses involving the purchase of internet-distributed products and services harmful to minors

(a)

Age verification requirement

A regulated payment system complies with the requirements under this subsection only if the system includes each of the following: (1)An interactive age verification process. (3)A network of authorized money receiving businesses. (2)A designated Internet payment account for each consumer. (4)Procedures for funding each designated Internet payment account that ensure that the consumer’s identity and age are verified as follows: (A)Verification shall be made by an independent second party when funds are first added to the designated internet payment account. (B)After verification under subparagraph (A), each time that funds are added to the account— (i)in the case of a consumer who has a money market, savings, checking, or other account in the same financial institution as the authorized money receiving business, the consumer may direct the transfer of money from his or her financial institution account to the designated internet payment account; and (ii)in the case of a consumer who does not have a money market, savings, checking, or other account in the same financial institution as the authorized money receiving business, verification shall be made using the same procedure that is used pursuant to subparagraph (A) when funds are first added to the account. (b)

Certification of compliance

(1)

Evaluation and certification of regulated payment systems

The Director of the Office of Electronic Funding Oversight shall evaluate each regulated payment system facilitating any regulated transaction for compliance with the requirements under subsection (a) and shall certify each regulated payment system that meets such requirements as so complying. (2)

Certification of authorized Internet payment processing businesses

The Director shall issue a certificate of compliance to each Internet payment processing business that offers a regulated payment system that is certified pursuant to paragraph (1). (3)

Certification program

The Director shall carry out a program for certifying authorized Internet payment processing businesses and shall issue such regulations as necessary to comply with the requirements of this subchapter. (c)

Registration

(1)

Requirement

The Director shall register with the Office each authorized Internet payment processing business that is issued a certificate of compliance under subsection (b)(2). (2)

Registration program

The Director shall carry out a program for registering authorized Internet payment processing businesses and shall issue such regulations as necessary to comply with the requirements of this subchapter. (d)

Coordinating regulations

(1)

Coordination with existing laws

The Director shall, where appropriate and in coordination with the Attorney General of the United States, coordinate the provisions of this subchapter with existing United States laws and regulations. (2)

Regulations

The Director may issue coordinating regulations as appropriate under subsection (1).

5373.

Office of Electronic Funding Oversight; policies and procedures to identify and prevent restricted transactions

(a)

Establishment in Treasury

(1)

In general

There is established within the Department of the Treasury the Office of Electronic Funding Oversight, the purposes of which are— (A)to coordinate Federal efforts to prohibit restricted transactions; (B)to develop controls necessary for regulated transactions; and (C)otherwise to carry out the duties specified in this subchapter. (2)

Director

The Office shall be headed by a Director, appointed by the Secretary. The Director of the Office may serve as the designee of the Secretary, at the request of the Secretary, for any purpose under this subchapter. (b)

Regulations

Not later than 270 days after the date of the enactment of this subchapter, the Secretary, in consultation with the Board of Governors of the Federal Reserve System and the Attorney General of the United States, shall prescribe regulations that require— (1)each Internet payment processing business, and all participants therein, to fully investigate the products and services offered by a seller of Internet-distributed products and services, regardless of whether the seller is domestic or foreign, prior to settling payments for the seller on behalf of its customers through the establishment of policies and procedures reasonably designed to— (A)ensure that the seller of Internet-distributed products and services is conducting business lawfully; and (B)prevent the settlement of payments for any seller of any Internet-distributed product or service harmful to minors if the Internet payment processing business is not authorized to do so by the Director; and (2)each payment processing business financial institution, and all participants therein, to fully investigate any Internet payment processing business, regardless of whether the business is domestic or foreign, for which it intends to hold accounts through the establishment of policies and procedures reasonably designed to— (A)ensure that the Internet payment processing business is conducting its business lawfully; and (B)prevent acceptance of accounts by any Internet payment processing business that intends to settle payments for sellers of any Internet-distributed product or service harmful to minors but is not authorized to do so by the Director. (c)

Requirements for policies and procedures

In prescribing regulations pursuant to subsection (b), the Secretary shall identify types of policies and procedures, including nonexclusive examples, which would be deemed, as applicable, to be reasonably designed to ensure and reasonably designed to prevent with respect to each seller of any Internet-distributed product or service harmful to minors in the case of Internet payment processing businesses or each Internet payment processing business in the case of Internet payment processing business financial institutions. (d)

Compliance with internet payment processing business policies and procedures

An Internet payment processing business shall be considered to be in compliance with the regulations prescribed under subsection (b), if such business relies on and complies with policies and procedures— (1)to identify sellers of any Internet-distributed product or service harmful to minors; (2)to ensure that payment settlements are executed on behalf of the seller of any Internet-distributed product or service harmful to minors only if such business is certified to do so by the Director; and (3)to ensure that payment settlements are executed on behalf of the seller of any Internet-distributed product or service harmful to minors only if such business is registered with the Office. (e)

Compliance with payment processing business financial institution policies and procedures

A payment processing business financial institution shall be considered to be in compliance with the regulations prescribed under subsection (b), if such financial institution relies on and complies with policies and procedures— (1)to identify Internet payment processing businesses that intend to settle payments for sellers of any Internet-distributed product or service harmful to minors; and (2)to ensure that no Internet payment processing business intending to settle payments for sellers of any Internet-distributed product or service harmful to minors and not certified by the Office in accordance with section 5372 is permitted to open an account held by such financial institution. (f)

No liability for refusing to process payments for a seller of any Internet-distributed product or service harmful to minors

An internet payment processing business that is subject to a regulation prescribed or order issued under this subchapter and refuses to process transactions that such business reasonably believes to be a restricted transaction, or as a member of an Internet payment processing business relies on the policies and procedures of the business, in an effort to comply with regulations prescribed under subsection (b), shall not be liable to any party for such action. (g)

No liability for refusing to hold accounts for a non-compliant Internet payment processing business

An internet payment processing business financial institution that is subject to a regulation prescribed or order issued under this subchapter and refuses to hold accounts for any Internet payment processing business that such financial institution reasonably believes to be unlawfully processing restricted transactions, or as a member of an Internet payment processing business financial institution relies on the policies and procedures of the financial institution, in an effort to comply with regulations prescribed under subsection (b), shall not be liable to any party for such action. (h)

Regulatory enforcement

Regulations issued by the Secretary under this subchapter shall be enforced by the Federal functional regulators and the Federal Trade Commission, in the manner provided in section 505(a) of the Gramm-Leach-Bliley Act.

5374.

Prohibition on acceptance of any non-compliant bank instrument for the purchase of internet-distributed products and services harmful to minors

An Internet payment processing business that is not in compliance with the provisions of section 5372 may not knowingly process, in connection with the purchase by a consumer of Internet-distributed products and services harmful to minors— (1)credit, or the proceeds of credit, extended to or on behalf of the consumer (including credit extended through the use of a credit card); (2)an electronic fund transfer, or funds transmitted by or through a money transmitting business, or the proceeds of an electronic fund transfer or money transmitting service, from or on behalf of a consumer; (3)any check, draft, or similar instrument which is drawn by or on behalf of a consumer and is drawn on or payable at or through any financial institution; or (4)the proceeds of any other form of financial transaction, as the Secretary may prescribe by regulation, which involves a financial institution as a payor or financial intermediary on behalf of or for the benefit of a consumer.

5375.

Limitations on liability relating to identity and age verification

An authorized money receiving business, in the course of verifying the identity and age of consumers as described in section 5372, shall not be held liable by any party for any errors made by an authorized Internet payment processing business in the course of settling payments made by a consumer to a seller of any Internet-distributed product or service harmful to minors.

5376.

Civil remedies

(a)

Jurisdiction

The district courts of the United States shall have original and exclusive jurisdiction to prevent and restrain violations of this subchapter or the rules or regulations issued under this subchapter by issuing appropriate orders in accordance with this section, regardless of whether a prosecution has been initiated under this subchapter. (b)

Proceedings

(1)

Institution by Federal Government

(A)

In general

The United States, acting through the Attorney General of the United States, or, in the case of rules or regulations issued under this subchapter, through an agency authorized to enforce such regulations in accordance with this subchapter, may institute proceedings under this section to prevent or restrain a violation or a threatened violation of this subchapter or such rules or regulations. (B)

Relief

Upon application of the United States under this paragraph, the district court may enter a preliminary injunction or an injunction against any person to prevent or restrain a violation or threatened violation of this subchapter or the rules or regulations issued under this subchapter, in accordance with rule 65 of the Federal Rules of Civil Procedure. (2)

Institution by State Attorney General

(A)

In general

The attorney general (or other appropriate State official) of a State in which a violation of this subchapter allegedly has occurred or will occur may institute proceedings under this section to prevent or restrain the violation or threatened violation. (B)

Relief

Upon application of the attorney general (or other appropriate State official) of an affected State under this paragraph, the district court may enter a preliminary injunction or an injunction against any person to prevent or restrain a violation or threatened violation of this subchapter, in accordance with rule 65 of the Federal Rules of Civil Procedure. (c)

Expedited proceedings

In addition to any proceeding under subsection (b), a district court may, in exigent circumstances, enter a temporary restraining order against a person alleged to be in violation of this subchapter or the rules or regulations issued under this subchapter, upon application of the United States under subsection (b)(1), or the attorney general (or other appropriate State official) of an affected State under subsection (b)(2), in accordance with rule 65(b) of the Federal Rules of Civil Procedure. (d)

Factors to be considered in certain cases for internet payment processing businesses

In considering granting relief under this section against any Internet payment processing business, or any participant in a Internet payment processing business that is not in compliance with the regulations issued under this subchapter, the court shall consider— (1)the extent to which the person participating in the Internet payment processing business knew or should have known that the transaction was in connection with an Internet-distributed product or service harmful to minors; (2)the history of such person participating in the Internet payment processing business when such person knew or should have known that the transaction is in connection with an Internet-distributed product or service harmful to minors; (3)the extent to which such person has established and is maintaining policies and procedures in compliance with rules and regulations issued under this subchapter; (4)the extent to which it is feasible for any specific remedy prescribed as part of such relief to be implemented by such person without substantial deviation from normal business practice; and (5)the costs and burdens that the specific remedy will have on such person. (e)

Factors to be considered in certain cases for Internet payment processing business financial institutions

In considering granting relief under this section against any Internet payment processing business financial institution, or any participant in an Internet payment processing business financial institution that is not in compliance with the regulations issued under this subchapter, the court shall consider— (1)the extent to which the person participating in the Internet payment processing business financial institution knew or should have known that the Internet payment processing business was settling payments for Internet-distributed products or services that are harmful to minors and was not in compliance with the regulations issued under this subchapter; (2)the history of such person participating in the Internet payment processing business financial institution when such person knew or should have known that the Internet payment processing business was settling payments for Internet-distributed products or services that are harmful to minors and was not in compliance with the regulations issued under this subchapter; (3)the extent to which such person has established and is maintaining policies and procedures in compliance with rules and regulations issued under this subchapter; (4)the extent to which it is feasible for any specific remedy prescribed as part of such relief to be implemented by such person without substantial deviation from normal business practice; and (5)the costs and burdens that the specific remedy will have on such person. (f)

Notice to regulators and financial institutions

Before initiating any proceeding under subsection (b), with respect to a violation or potential violation of this subchapter or the rules or regulations issued under this subchapter by any Internet payment processing business or Internet payment processing business financial institution, the Attorney General of the United States, an attorney general (or other appropriate State official) of a State, or an agency authorized to initiate such proceeding under this subchapter, shall— (1)notify such business or financial institution, and the appropriate regulatory agency (as determined in accordance with section 5373(h) for such business or financial institution) of such violation or potential violation and the remedy to be sought in such proceeding; and (2)allow such business or financial institution not longer than 60 days to implement a remedy for the violation or potential violation, consistent with the factors described in subsection (d) or (e), and in conjunction with such action as the appropriate regulatory agency may take, if such business or financial institution takes reasonable steps within that 60-day period to prevent the occurrence of such violation or potential violation pending implementation of such remedy.

5377.

Criminal penalties

Whoever violates any provision of this subchapter or the rules or regulations issued under any provision of this subchapter shall be fined under title 18, United States Code, or imprisoned for not more than 5 years, or both.

(b)

Clerical amendment

The table of sections at the beginning of chapter 53 of title 31, United States Code, is amended by adding at the end the following:

Subchapter V—Regulation of funding of internet-distributed products and services harmful to minors

5371. Definitions.

5372. Age verification requirement for internet payment processing businesses involving the purchase of internet-distributed products and services harmful to minors.

5373. Office of Electronic Funding Oversight; policies and procedures to identify and prevent restricted transactions.

5374. Prohibition on acceptance of any non-compliant bank instrument for the purchase of internet-distributed products and services harmful to minors.

5375. Limitations on liability relating to identity and age verification.

5376. Civil remedies.

5377. Criminal penalties.