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FaceCash Files Formal Complaints Against Stanford, USC, Pomona, and AAU
- temphn 15y agoSure, Aaron Greenspan/thinkcomp complains too much about Facebook. But here he absolutely has the State of California dead to rights. This is about as clearcut a concrete example as you can get of how "regulatory uncertainty" kills businesses dead. The key bureaucrat involved won't even state the net worth you need to be a payment processor in CA! His name is: Jacob Appelsmith jacob.appelsmith@abc.ca.gov A polite email asking him why it is now official CA state policy to persecute payment startups might be useful. EDIT: Mr. Greenspan, your exhibit at the end made me laugh out loud: http://www.aarongreenspan.com/writing/20111019.aaupacket.pdf http://www.aarongreenspan.com/writing/20111019.aaupacket.pdf Awesome and very funny. You might want to make these pdfs bigger, or just make the webpage one long html file.
- thinkcomp 15y agoIt's not just that. The same bureaucrats perpetuate the falsehood that high net worth requirements somehow protect consumers. They do not. The extremely expensive surety bonds put in place as insurance (since FDIC protection does not cover money transmitters) only go a very short distance, and beyond that, they only cover licensed money transmitters. This means that the whole system is pointless, because consumers are never protected from the highest-risk money transmitters: those who never bothered to apply for a license (maybe because the requirements are so high). So despite the facade of regulation and consumer protection, the system actually increases risk while protecting incumbent interests.
- devs1010 15y agoI don't agree with the government and hate their authoritanarianism but isn't this essentialy what the OWS protests are all about? Its become pretty well known that big finance / big banking own the government and anything that threatens them is going to be responded to very harshly. I just think you may benefit form taking your message to a larger audience as it is more indicative of the overall corruption of the government than anything else and may not be specifically related to most other tech startups.
- thinkcomp 15y agoYes, this is definitely related to the general protests that people have related to the banking industry, and especially debit card fees. See: http://www.aarongreenspan.com/writing/durbin.html http://www.aarongreenspan.com/writing/durbin.html So I agree--more people need to know.
- FluidDjango 15y ago> the falsehood that high net worth requirements somehow protect consumers Perhaps they serve to protect that vulnerable segment of our population, the mega-corporation? Once yours reaches sufficient size/influence [never to be explicitly specified] it may be able to claim such rights for itself before the U.S. Supreme Court, the supremely sympathetic arbitrator of such matters in this country. [/sarcasm]
- staunch 15y agoWow, truly breathtaking that you managed to squeeze a claim of creating Facebook in there. Have you considered that maybe if you were more willing to break stupid bureaucratic rules you wouldn't run into these roadblocks? It's not even clear the law applies to you and very unlikely anyone is going to care unless you're successful (at which point it would be worth fighting over). PayPal was arguably breaking all kinds of esoteric banking laws when they started. They were getting constant threats from state attorneys. In the end they worked it all out.
- thinkcomp 15y agoI don't assume that politicians know anything about me. Context can be helpful in getting a message across. PayPal started before the USA PATRIOT Act made it a federal crime to violate state money transmission statutes. Max and Peter weren't looking at jailtime in 1999. Entrepreneurs (and investors, and directors) today in this space who break the rules are. Besides which the California law only went into effect this July, twelve years after PayPal started. Also, it's extremely clear that the law does apply to us; that's why we were able to get an exemption order.
- staunch 15y ago1. Take the risk anyway. 2. Change your idea. 3. Spend the next year trading letters with bureaucrats. What Would Zuck Do?
- JoshTriplett 15y agoThis seems like quite a lot of trouble to go to, rather than simply move to a state with less regulatory insanity. Startups have enough windmills to tilt at without taking on more.
- thinkcomp 15y agoMoving doesn't make you exempt. Retailers want a national solution anyway.
- Vivtek 15y agoMoving would underscore the damage the law and its haphazard enforcement are doing to the State of California, though.
- JoshTriplett 15y agoStates aren't allowed to regulate inter-state commerce, as much as they'd like to think otherwise. Worst case, you might have to say "Sorry, we can't accept customers from California, because those customers might be breaking the law in their own state", and you only need to do that if the law penalizes customers and not just the businesses serving those customers. Now, if you do business within a state with no such laws and another state claims regulatory authority over your business, or if some federal regulation attempts to enforce this ridiculosity, then by all means I'd suggest fighting that tooth and nail. A business should only have to deal with one vertical tower of authorities above them, not all the ones sideways of them too.
- thinkcomp 15y agoThat's the situation we were in. Initially the California DFI said we couldn't do business in Massachusetts where there are no laws, or in Alabama and Idaho, where we have licenses, without taking the risk that I might land up in jail for violating California law. Hence the fighting.
- JoshTriplett 15y ago
- devs1010 15y agoThe government is all over money transmissions now, they are putting regulations in place in the name of fighting terrorism, war on drugs, etc I don't think this is indicative of a larger problem of all startups being affected by overwhelming regulation, the FaceCash guy chose to go into a very heavily regulated field and I have a feeling he would face issues anywhere in the US, if not from the state government, then from the feds
- scottshapiro 15y agotl;dr? Do startups like WePay also face similar challenges?
- thinkcomp 15y agoYes and no. WePay is an agent of The Bancorp Bank (because of laws like these), so they are exempt from most money transmission laws. On the other hand, FC § 1827 makes it a crime for any entity to aid an organization that would otherwise require a license. So who knows what's going on there. http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&group=01001-02000&file=1825-1828 http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin...
- lisper 15y agoSo why don't you work through Bancorp as well?
- trevelyan 15y agoBusiness partnerships with massive companies are not exactly easy to get, especially when you are dealing with regulatory uncertainty. Aaron is doing the right thing.
- thinkcomp 15y agoI called them after talking to them at a conference. They said that they're not representing any technology companies. I asked about WePay; they said that was an usual exception. From what I've heard they're totally dysfunctional internally. Also, every time you add a middleman, the price of your product goes up. We can charge 1.5% flat per transaction because there are no middlemen. We run the whole network.
- stickfigure 15y agoTo add context, WePay's fee is 3.5%.
- cookiecaper 15y ago
- natrius 15y agoThis discussion will doubtlessly drift towards your claim of creating Facebook when it's unrelated to the rest of your solid argument. I don't understand the logic behind your decision to throw that in the mix.
- rprasad 15y agoI assume that it was his attempt to give himself the appearance of authority, because the lengthy rant sure as hell did not. The guy displays shockingly poor decision-making. Why would I (as a prospective customer) want to do business with a company that didn't do basic research into the regulatory environment of its target market? The point of the capitalization requirement is not to inhibit startups -- rather, the point is to make sure that someone who wants to launch a business handling other people's money puts at least some thought into it. In this case, the Aaron guy appears not to have put any thought into it at all, and is now blaming everyone else for his mistakes.
- thinkcomp 15y agoI did basic research, and a lot more, actually. The real question is how do you research, in 2009, a law that won't be drafted until 2010? It didn't exist at the time. In this particular case, the point of the capitalization requirement actually is to inhibit new businesses. There are much better ways to assess risk, such as taking into account the actual involvement of credit, investments, and anti-fraud measures.
- malandrew 15y agoAFAIK, the regulatory environment of his target market changed due to the lobbying of the Money Servies Round Table. The changes made to the law resulted in the company, which was previously legal, to fun afoul of the law.
- ceejayoz 15y ago> This discussion will doubtlessly drift towards your claim of creating Facebook when it's unrelated to the rest of your solid argument. Here, and at the intended recipients as well. "I invented Facebook" being thrown in to a formal letter is likely to drop it into the crank file (as will the "this guy also filed a bunch of complaints against colleges for having meal plans").
- foobarbazetc 15y agoMeh.
- luser001 15y agoI know some are going to hate on you here, but you're a real hero man. Darwinspeed to you. You're helping all of us little guys here.
- cpeterso 15y agoDespite the name, FaceCash identifies purchasers with a bar code, not their face. FaceCash's face identification is the equivalent of credit cards with your photo on them. The photo is just casual security and doesn't help for online purchases. My university's cafeteria linked student id cards with a debit system. To ensure cafeteria cashiers checked the cards' photos, "secret shoppers" would occasionally try to buy lunch with a card featuring a portrait of a friendly golden retriever. :)
- thinkcomp 15y agoThis is incorrect. The photo that matters for FaceCash is the one that is downloaded from the server onto the POS. The one on the phone is just for show, and cashiers are instructed to basically ignore it. So if you're a thief, you can't just put a JPEG of your thief-face next to someone else's barcode. The correct owner's face will still show up on the register.
- rfugger 15y agoQuestion: Did the state come after Mr. Greenspan, or did he pick a fight with them because of this silly rule? If it's the latter, then I certainly sympathize, but it doesn't seem like the best approach to having your business succeed. Better to avoid attracting undue attention until you're big and well-connected enough that any bureaucrat who threatens you with an arbitrary rule is risking their own job. Until you're that big, you're likely under their radar anyway.
- rhizome 15y agoAnd hey, if you don't wind up being under their radar, it's only prison, right?
- DevX101 15y agoWhat Aaron's trying to get accomplished here is precisely the type of work that lobbyists get paid for. And although he's right, the government can stonewall him indefinitely unless they have some kind of executive order to force a resolution. I'm sure that Paypal, VISA and friends have made campaign contributions or have had long conversations over games of golf to delay any competitive threat to their business model so he's got a steep hill to climb. I'm assuming as a startup he can't afford to have a lobbying firm on retainer, so the best outcome would be that the Times or the Journal picks up this story and shames them into action. But man, I admire the chutzpah and the brass balls it takes to pick this fight. Good luck!
- NoPiece 15y agoYou are right, and it is unfortunate that a small business might need to consider lobbying as part of their funding/business plan. It's enough to steer many from even considering the financial industry, which is the outcome that the industry wants..
- ditojim 15y agowe need less lobbyists, not more. they are the problem, not the solution.
- ramanujan 15y agoRelatively few people want to spend money on lobbyists, but when Washington or Sacramento changes the rules on you, what can you do? To remain silent might mean your business dies. To make your voice heard is to lobby. All right, then lobby it is, unfortunately.
- thinkcomp 15y agoI think we need more lobbyists, actually: the lobbyists should be the people. http://www.plainsite.org http://www.plainsite.org
- ditojim 15y agoyes! listen to the public - the actual public. not special interest groups and corporations. our current lobbyists and these groups are the ones who put us here in the first place.
- jellicle 15y agoOf course we only have one side of the story here, and considering that that side is self-evidently crazy, it's hard to take it very seriously. I'm all in favor of regulations to prevent outright theft and fraud of a great deal of the public's money with no accountability. Gift card companies are repeatedly defrauding the public. Money transfer companies are repeatedly defrauding the public. Bitcoin gateways are repeatedly defrauding the public. I don't give a shit if you think the Man is keeping you down; you're trying to put your business risk (and perhaps your actual intent to defraud, but ABSOLUTELY your business risk) onto the public, and for some reason you think you're entitled to do so. Your business risk ought to be borne by you, which means requiring you to get a big fat surety bond before you start handling large amounts of public money, so that when you fuck up your company (or intentionally bail with all their cash), the public isn't left holding the bag for you. Too damn bad.
- rhizome 15y agoSo, how much should that surety bond be?
- thinkcomp 15y agoWhat about small amounts of public money, as startups will inevitably start with? Surety bonds only cover the licensed companies. Consumers are still at considerable risk as long as not everyone has a license. And usually the fraudsters aren't the first in line at the DFI with all of the required forms and audits.
- wging 15y agoAnd if he can't be told how big the surety bond has to be, then how can he put up the money?
- useflyer 15y agoI don't mean to come off as insulting, but the problem clearly seems to be Aaron, and not California. He is overly combative, unwilling to accept olive branches (and exemptions! resolving the issue!), and stubborn. Find the path of least resistance, don't keep slamming into the same brick wall. An entrepreneur should know how to problem-solve. MAKE IT WORK.
- temphn 15y ago1. Government by waiver is not the rule of law. 2. The waiver was only issued because he was embarrassing them in front of reporters. 3. The waiver does not cover intra-state operations, which would mean he would be unable to get early adopters from the most technology friendly place in the country. He would also be unable to demo the product in front of investors.
- danbmil99 15y agoTIL I would not hire Aaron Greenspan as a general contractor to build an extension to my house (particularly if any zoning variances were required).
- thinkcomp 15y agoThat's good, because I'd be a terrible general contractor!
- tzs 15y agoIt's not clear those schools need licensing. The California law has an exception for stored value systems used within an organization and its affiliates. It depends on whether local merchants with whom the school has made an arrangement to have the card accepted would count as affiliates.
- losethos 15y agoGod says... C:\TEXT\WALDEN.TXT to live dearly there, but to transact some private business with the fewest obstacles; to be hindered from accomplishing which for want of a little common sense, a little enterprise and business talent, appeared not so sad as foolish. I have always endeavored to acquire strict business habits; they are indispensable to every man. If your trade is with the Celestial Empire, then some small counting house on the coast, in some Salem harbor, will be fixture enough. You will export such articles
- pbreit 15y agoI commend Aaron for fighting the battle but I'm afraid his scorched earth tactics are working against him. He needs friends, not enemies. Would someone like Gavin Newsom or Steve Westly would take a look at this? The better approach probably is to use a third party to prove the concept. No one has infiltrated the point-of-sale by offering to shave a few basis points off card processing.
- vsl2 15y agoAaron, I applaud your principles and enjoy reading your somewhat condescending(because the bureaucratic idiots deserve it) yet still controlled responses. Incompetence drives me mad and I can't imagine how pissed off I'd be if I were in your shoes right now. Does FaceCash have a legal team or are you doing this all on your own? I imagine you've researched every possible legal angle regarding the situation and you certainly don't need a law degree for that, but professionals could provide some additional insights, just from work experience (e.g. what happens in situations with other similar regulations and stupidity). Having practiced tax law in the past (three years in NY), I know that how certain things work in that field that you can't pick up from reading statutes or cases. Given that you've gotten the exemption for doing business in other states, are you back to building out your business with the exception of in California? At some point, you've got to move on and do what's best for FaceCash even if that means not completely righting the wrong - unfortunately, incompetence and bureaucracy may be able to stand much longer than you can afford to fight.
- thinkcomp 15y agoI'm the legal team for now. I've talked to a number of lawyers, and most seem to think that they can't do much more than what I have been doing. It makes no sense to waste money on them in any case. Since I only got the go-ahead to continue operating outside of CA as of October 13th, I'm starting to think about building things up again.
- abalone 15y agoThis poor fellow has a history of blaming the world for his own business failures. Just lookback at his claims re: facebook vs his own competing site at harvard. The money transmitter regulations are a reaction to a serious problem with shady transmitters in california that prey mostly on poor people sending money back home. In this funding climate there should be little problem in raising the capital necessary to secure a bond if your payments startup is attractive to investors. The problem is that nobody wants to fund facecash.
- thinkcomp 15y agoI actually thought that there had to be some horrible shady money transmission story that inspired the law, too, so I looked for it. I couldn't find it. If you find it, please let me know because I want to know what it is.
- codex 15y agoThis letter reads like some looney Usenet rant. Between my cringing and facepalming, I began to see the beginnings of a reasonable argument here, which makes this letter all the sadder.
- DanBC 15y agoThe quantities of CC'd addresses were kind of kook-like. There are better ways to challenge unjust laws than writing loser-length mail to people who are working lousy jobs with no power to change those laws.
- kragen 15y agoI recall another online payment processor that got into conflicts with the government over opaque laws: http://www.wired.com/threatlevel/2007/04/egold_owner_cal/ http://www.wired.com/threatlevel/2007/04/egold_owner_cal/
- Luyt 15y agoAnd that ended thus: "In November Gold & Silver Reserve CEO Douglas Jackson was sentenced to 300 hours of community service, a $200 fine, and three years of supervision, including six months of electronically monitored home detention. He had faced a maximum sentence of 20 years in prison and a $500,000 fine. Judge Rosemary Collyer said the men deserved lenient sentences because they did not intend to engage in illegal activity. Jackson's lawyer claimed Jackson was spared the heavier fine because he is deeply in debt - the Judge said "Dr. Jackson has suffered, will continue to suffer, and may never be successful with E-Gold". Reid Jackson, Douglas Jackson's brother, and E-Gold director Barry Downey were each sentenced to three years of probation, 300 hours of community service, and ordered to pay a $2,500 fine and a $100 assessment fee each." Source: http://en.wikipedia.org/wiki/E-gold http://en.wikipedia.org/wiki/E-gold
- newchimedes 15y agoI think it's awesome what you've done so far and am thoroughly impressed with your patience and tactics so far to get as far as you have. It's about time someone called out the government on their shenanigans because too many people site back and chalk it up to "that's just the way it is".
- powertower 15y agoReading to the end I see that they gave him an exemption from the regulation/law? Right? So what's the issue?
- plusbryan 15y agoWhat a frustrating situation. Best of luck fighting for the cause of less regulation. My advice - keep fighting the good fight by building and trialling your product in other states and countries. As unfair and unjust the law may be, there's no reason for you to sit "idle" when you could be building, growing and learning. If you're successful, it'll be all the easier to convince the state to license you.
- jpdoctor 15y agoSrsly: I think you are on the cusp of something huge Aaron, and I wish you a ton of luck, but for pete's sake: Move the company out of state already. Contrary to conventional wisdom, you can fight city hall but is that really where you want to spend your company's energy and time? Turn your company into something so successful that CA offers you a tax break to move back here.
- thinkcomp 15y agoMoving would be a Pyrrhic victory. There would still be 46 similar laws holding us and other startups back. Winning is to convincing Congress to pre-empt state laws with a sensible federal regulatory system.
- dpe82 15y agoYou do not want to open that door. At least as it currently stands a fair number of states aren't yet completely owned by corporate interests and so you can at least operate in some of them. Congress is. If congress got involved you would get a uniform system for sure - your business would be uniformly banned.
- latchkey 15y agoI'm curious what the hebrew at the very bottom of the page says.
- greyboy 15y agoFrom the 'About' page: "What's with the Hebrew? I've always liked languages (especially Hebrew), and the phrase on this web site translates to a kind of personal ethos: societal longevity through truth and innovation."
- mkopinsky 15y agoAha. I've found my place to add this comment. The grammar in the Hebrew does not seem to be correct. In Hebrew, nouns often precede adjectives. "Societal longevity" should properly be אריכות ימים חברתית.
- linusrus 15y ago"Or, he could just move on and do something that doesn't require fighting the government." This is exactly what not to do. But following maximusprime perspective, why not just leave the US and take your business to another more business friendly country (like it or leave it). Aaron... don't stop complaining. Keep up the fight. It's not the government you are fighting but other humans that use the 'government' as a facade. The old folks don't understand the new kids... and they fear us for that. They fear change. Keep fighting for us. Fight for the USER.