This is a very useful subject to cover so merchants understand what they can do if things go wrong. Of course everybody from time to time is on the wrong end of some bad service, but what about when it goes beyond that. What system of recourse does a merchant have….

The following is an informational guide to what a merchant can do without going down the expensive route of contacting a lawyer, or attempting legal proceedings and should not be taken as legal advice.

In many cases it is much better to settle problems directly with your merchant account provider. Unfortunately, many merchant account providers practice ‘aggressive’ sales tactics that mean they may not disclose all the charges and the exact fee system when a merchant signs up for an account, but this is not necessarily illegal. Misunderstandings and not giving full verbal disclosure are where most problems between merchants and their processors occur. It may be that you just have to swallow it, if it’s a case of something being in the contract that was not clearly explained before signing up.

No Direct Evidence

However, if you are processing a sizable amount per month speaking to managers at the processing company to make it clear that they are making a profit from your business, may be enough to resolve any issues.

When it goes beyond misunderstanding and aggressive sales tactics to something unlawful is when it’s time to report your merchant account provider to agencies that can do something about it. If this is the case, or in fact whenever you have an issue with your provider it’s important to record all the conversations and communications you have with them, so you have a full record if it’s ever needed.

Dealing With The Merchant Account Provider

The best way to get issues solved is by remaining calm, if you have been ‘screwed’ then you’re bound to be angry, but ranting and raving, or writing abusive emails, reviews, or feedback on webistes is not the way to go. This is especially true if you are filling out an official form.

Try to remain level headed and stick to the facts. Don’t lie or stretch the truth. It may seem a funny thing to say, but it is extremely important to stick clearly to exactly what has happened. Steer clear of personal opinions and individual attacks.

Write A Report And File It With The Right People.

Once you have exhausted your other options it’s time to write a report. One of the first things you can do is write an on line review. It may not solve the problem, but Credit Card Processors monitor their feedback on line and writing about your experiences may help by getting them to take notice. It will also help other people to avoid the problems you have run into, because people listen to on line reviews. Find Your Merchant Account gives people the opportunity to do just this.

The BBB

The BBB, or Better Business Bureau is not a government agency, or a non profit. It also doesn’t have the power to take legal action, or shut anyone down, but businesses sure do care about what the BBB says about them. Filing a complaint through the Better business bureau can be very effective and make a processing company really listen to a complaint.

Get in contact With Their Acquiring Bank

Every merchant account provider has been sponsored by an acquiring bank. If the BBB complaint has not brought any results, then the Acquiring bank who underwrites all the processors accounts may listen, if they do then this will often resolve the problem. It’s very difficult for a merchant provider to find an acquiring bank, so they do not want to cause problems with them.

The acquiring bank will normally be listed at the bottom of the merchant providers website using the terms ‘The Merchant Provider is a registered ISO/MSP of the following bank(s)…’

File a complaint With the FTC

It there is definite fraud then the FTC should be informed.Click here for their website, or watch the short video below about making a complaint to the FTC.

State Attorney General and Government Representatives

If the situation is definitely illegal then your state attorney general has a lot of power. If you do contact the state attorney general make sure that you are in a position to present all the evidence you need clearly. A simple search in Google, or any other search engine will bring up who you need to contact.

By the same token contacting government representatives in the Senate and Congress helps to bring attention to issues in the credit card processing industry, not least the fact that it lacks proper regulation.

National White Collar Crime Center and Internet Crime Complaint Center

The National White Collar Crime Center (NW3C for short) works with law enforcement agencies on fraud and cyber crime. and the Internet Crime Complaint Center is a collaboration between them and the FBI specifically targeting e commerce crime. A report to them will help them to alert the appropriate authorities to deal with the situation.

http://www.ic3.gov
http://www.nw3c.org

High Risk Merchant Accounts are for high risk customers. They are more expensive than standard merchant accounts because the merchant is categorized as being more likely to cause problems for the processing companies.

There are several reasons why a business might be categorized as ‘high risk’. They are due to poor credit history of the business or individual applying, the industry the business being known to normally have a high number of chargebacks, fraud, or being questionable from a legal point of view.

The reason fo the higher charges is so that processing companies can manage the extra risk and protect themselves. When an individual purchases goods or services with a credit card the money that they spend is transferred from the bank to the merchant’s account. However, the bank is still liable to repay that money back to the customer at some point in the furture in the case to fraud, or chargebacks, so the money is effectively being loaned to the merchant. The merchant processors are therefore at risk from less than honest merchants.

So what are the options for High Risk Merchants?

Of course there are plenty of ‘good’ merchants that are still classed as high risk and who still need to process credit cards to do business. if you are in that situation the good news is that there is a specific section of the merchant account industry that is dedicated to dealing with high risk customers, so that anyone in this situation still has options available to them. The bad news is that the processing companies have to put in much higher markups than with normal merchant accounts to balance the risk of dealing with merchants in this sector.

Do your research and read the contract…

The same advice that we give for traditional merchants still holds true for high risk merchants in that you should speak to as many different providers as possible when looking for a merchant account and find out exactly what their pricing structure is and what all of the fees are that will apply to your account. Work out what fees you are most likely to pay for the types of transaction you will be taking and don’t just take the flat, or lowest possible rate as an indication of the costs for all transactions.

This means that any and all contracts have to be read very carefully from cover to cover, don’t skip this as many merchant providers like to hide details in the small print.

Example of industries that are categorized as high risk include:

Including both On line and Off line gambling companies for example casinos, sports betting and poker.

A very big industry especially with the current economic climate, it includes Consolidation, Negotiation, Collection, Credit Card Debt Restructuring and Credit Repair Companies.

Chat, Gossip, Horoscopes, etc.

Currency Exchange, Cash Checking and Couriering / Transfer Services.

From parties, chat lines and toys to escort services and pay sites.

An area people are often surprised by, but travel companies are often classed as high risk and include Airlines, Charters, Travel Agents, Time shares and Tour Operators.

Companies whose products may have legal issues

Other Merchants Types often classed as high type, sometimes due to recurrent billing models.

There are some merchants who have difficulty even securing high risk merchant services, the options for them are generally to look at offshore merchant services. In this case we really recommend being 100% of the company being dealt with as the complexity of the legal situation and potential for problems increases significantly. There are some High Risk specialist Merchant Account providers however, that do specialize in dealing with banks both onshore and offshore and have a good reputation in the marketplace and are best to deal with in these situations.

Following on from the last post about the future of the Processing industry this post comes from an article originally covered in Wired magazine.

It centers on a well known restaurant in Park City, Utah – Cisero’s, which has a celebrity following that includes Russel Crowe and Robert Redford who with many others flock to the city for the annual Sundance Film festival; and their Merchant Account provider Elavon. It’s the first case to challange the controversial PCI security standards, and could prove to be a landmark case.

The PCI Compliance Security Standards Council was set up by the credit card companies – Visa and Mastercard to ensure that merchants take steps to safeguard data collected from their customers when they process payments to prevent fraud. Visa and Mastercard conduct periodic audits and then charge PCI audit fees to merchant account providers such as Evalon. However, it is standard in the industry that the processing companies then pass these fees onto merchants. Although it’s not always done at cost price, often it comes with a significant markup, or in other words a profit for the processing companies.

Fine For Fradulaent transactions…

The problem for Cicero’s started when US bank (the acquiring bank) and Evalon where fined $90,000 by Visa and Mastercard for alleged security breaches in the Cisero network that led to fraudulent credit card transactions. US bank then immediately took $10,000 from Cicero’s account and sued them for another $82,600.

As with the audit fees, under the PCI system the credit card companies fine the banks and merchant account providers not the merchants themselves. However, the merchant account providers put conditions in the contracts the merchants must sign to ensure that it is the merchants and not themselves who end up paying any fines that they get.

Under PCI rules before the fine was issued, Cicero’s was required to hire a forensic investigation company to examine their servers and POS systems, to find out if any breaches at their restaurant had been responsible for reported frauds. They did, in fact they hired two, both firms came to the conclusion that there was no evidence that the security systems had been breached. However, they did find that unencrypted information was being stored as the cards were read. This was the only issue that was found at the restaurant, there was no other evidence that Cicero’s were at fault.

However, without any direct evidence that they were responsible the fine was issued and Cicero’s were not given an opportunity to defend themselves against the claims. The point is that the system is set up by the credit card companies and not subject to any governing body and according to Wired has been called a “‘near scam’ by a spokesman for the National Retail Federation and others who say it’s designed less to secure card data than to profit credit card companies while giving them executive powers of punishment through a mandated compliance system that has no oversight.”

The lawsuit brings two major issues to light firstly that Merchants have no means to appeal fines. Cicero’s were not given an opportunity to defend themselves against the claims, or to present any evidence showing they were not responsible for frauds that were claimed against them. (Circero’s claim that some of the resulting frauds that were claimed to be a result of their security breaches came from cards never used at their restaurant).

Secondly, as was directly alleged by Cicero’s lawsuit, is that the PCI and the banks force merchants to sign agreements that are inherently unfair and are “one-sided contracts that are based on information that arbitrarily changes without notice, and that they impose random fines on merchants without providing proof of a breach or of fraudulent losses and without allowing merchants a meaningful opportunity to dispute claims before money is seized.”

The rules regarding PCI actually went into effect a full 4 years after Cicero’s had signed their contract with Evalon. They are asserting that they were never given direct notice, or help to make sure they adhered to them which was why they ended up with unencrypted data being stored in the first place.

The Future

If Cicero’s are successful it could open doors for other merchants to do the same. It only has to happen once and then all the other contracts that are currently standard in the industry are then put into question. The potential upside is that it could force merchant providers to become accountable for the fees they charge to merchants for PCI compliance, and force a change in the terms of the contracts that at the moment merchants have no choice but to sign. It may also raise the question on whether PCI in it’s present form is more about profits for the credit card companies, rather than preventing fraud.

The Credit Card Processing industry has long been given a hard time by retailers and in many instances with good reason. Retailers have to take credit cards to succeed in business, but so many of the processing companies have used this fact this to squeeze their customers for as much as possible.

It’s still common in the industry to find merchants that are being forced to pay 4-5% in effective costs, combined with ‘customer service’ that is often anything but customer service. The game has been to try to lock merchants in with longer term contracts as well as hitting them with extra fees such as cancellation fees, monthly fees, statement fees, compliance fees, AVS fees – the list goes on.

It’s always been a high turnover industry, but the emergence of new technologies and young innovative companies wanting to change existing models may well bring about the changes most merchants want to see.

Mobile Smartphone Processing

One of the biggest complaints about credit card processing is that merchants are initially told rates that don’t compare to what they actually pay. The reason is because many payments don’t fulfill the requirements for the ‘safest’ interchange categories, or they attract a ‘downgrade fee’ in tiered pricing, (click the link for an explanation of processing rates). Companies like GoPayment and Square are offering free card readers, with no fees, no contract and flat transparent processing fees.

Square has already hit the 1 million mark in terms of the numbers of readers sent out to customers. These companies are great in their own right for occasional. or low turnover merchants as well as as back up systems for a normal merchant account.

However, of themselves they are not going to turn the industry on it’s head. The main reason being that for merchants with larger turnovers traditional merchant accounts are still the cheaper option, and merchant account providers are going to be able to offer better customer service (at least the best ones). Never the less, the impact of these companies on the industry is huge. It has led to many merchant account providers developing their own Mobile processing smart phone apps and card readers in response, although these apps are available with the same pricing plans are the companies provide for their other merchant accounts.

Digital Wallets

Perhaps what will be the bigger factor in forcing change in the traditional merchant account industry will be the rise of the digital wallet. There are already many major companies behind this as well as new start ups including the likes of Mastercard, Visa, Paypal, Google and start ups LevelUp and Aisle buyer.

Using NFC technology (Near Field Communication) smart phones are able to accept and make payments. The adoption of these technologies will be slow, due to the limitations of the technology as present and due to the cost of the equipment needed as well as the logistics involved, and the natural resistance from consumers and merchants to change. But it is a case of when not if the technology becomes mainstream.

Tablet POS systems

We are already seeing the spread of tablet POS systems, thanks largely to the remarkable success of tablets themselves. Although these systems again are in their infacny and have limitations at the moment, they are an indication of further developments to come. A good example is the adoption of mFoundry by Starbucks, which currently allows payments with an iphone, or ipod touch.

Statements that actually help merchants?

Furthermore start ups are now looking at the way they can use the data that they collect from merchants from processing their cards as a way to help them recognize patterns and market better and more efficiently to their customers. Traditionally the merchant account statement has always been a maze of confusion for merchants, often the more complicated the statement the more easily hidden charges were kept, well, hidden. Again this is in the very early stages, but the outlook is promising.

End of the Durbin agreement?

The Durbin agreement had the right intentions and it brought national attention to some of the problems in the industry, but the result was poorly planned legislation that did little to help and ended up significantly increasing the transaction costs of sales below $30.

However, the legal action by certain major retailers should see a way clear for the eventual repeal of the act. Even the initiator, Dick Durbin has been on record with his less than positive thoughts on the situation.

It ain’t all good though…

Like most things in life it’s not all good, in fact in the short term things are actually likely to get more expensive for merchants.

Many merchants will be using the new government regulations, such as Durbin and 1099-K to increase fees as well as marking up fee changes from Visa and master card. The way to deal with this though is the same as it always is and that is to insist on full disclosure from your merchant account provider, or any potential provider. This includes checking for extra fees and or increases in processing rates.

One of the main reasons that this site recommends processors with no, or month to month contracts is that merchants do not get caught out by fee changes and long term contracts. At the very least merchants should make sure any longer term contract has a clause that allows them to get out if fees, or rates are changed, or added.

There’s not much that gets merchants blood boiling like chargebacks, sadly however, they are an inevitable part of the credit card processing business.

But what are they exactly and more importantly how do you keep them to a minimum:

Chargeback Guide

Chargebacks were created ‘back in the day’ to protect consumers and make sure merchants were accountable for the payments that they processed.

They are quite simply ‘a reversal of transferred funds’, however they differ from a refund when the customer, or consumer goes directly to the merchant to get the money returned for goods or service. With a charge back the consumer is refunded indirectly by approaching the card issuing bank and in turn the merchant’s banks. They then reverse the transaction debiting the merchant’s account and crediting the customer.

They are unpleasant at the least and can have serious repercussions for a merchant, such as incurring high penalties, or receiving a temporary stop on their merchant account, or even a complete termination of their account with a merchant account provider.

Whatever the outcome the main thing that a merchant must do to ensure that they keep their chargebacks to an absolute minimum is to understand the reasons that chargebacks occur and then to put in place measures to try to prevent them occurring.

Chargeback Reasons:

The reasons for chargebacks come under 3 broad categories, they are :

Clerical and Technical Errors – Examples of Technical errors would be things like expired authorization codes and banking errors. Clerical errors cover mistakes in billing amounts, putting through multiple bills by mistake, transactions for the wrong amount, or forgetting to process refunds. I would also include when a customer does not recognize the transaction on their credit card statement, either because they have forgotten about the transaction, or the description of the product, or service being too vague on their statement.

Problems with the product, or service – This category includes problems with what is actually provided, perhaps it’s down to the quality of the product or service, or the description that was given of what was being sold. Basically, it comes down to the customer not being happy with what they have bought and wanting their money back.

Fraud – This when the customer has legitimately had their card, or card details stolen and the payments have been initiated by someone who does not have the authority to do so.

Steps To Keep Chargebacks To A Minimum

Make sure what you are selling is clearly described – That way the purchaser knows exactly what they are getting and there are no surprises. It also ensures that it is much more difficult for them to show how the product or service is not what was advertised. Also if a product is being shipped make sure the customer knows how long it will take for the product to get there, or if any delays may occur.

Make sure the refunds process is easy – Make sure it’s not difficult to get a refund if a customer has a genuine grievance. This key aspect to this means being contactable and communicating with the customer to sort out any problems. That way they are much less likely to feel the need to speak to their card issuing bank. Also make sure you have clear and easy to find contact information on your website, or on the receipt the customer receives for the purchase.

Expiration Date – Always check the expiration date of the card, and never accept cards that have expired.

Make sure your Billing Descriptor can be recognized – The Billing Descriptor is the way you company’s name appears on a customers credit card statement. To minimize the chances someone will not remember make sure it’s recognizable and has a customer service number with it. (Having these 2 bits of information in the billing descriptor may also qualify you for a lower interchange fee in a ‘card not present environment’ – i.e when you take payments when the card is not there, such as over the Internet, or telephone.)

Make sure ‘your house’ is in order – Keep all your records up to date, if it’s face to face transactions, make sure you keep all receipts and anything else related to the transactions. This will include things like Pod’s (proof of delivery), as well as shipping and carrier details if physical products need to be shipped, so they can be called upon easily if there is any dispute.

Correct Data Collection – Make sure the AVS (Address verification System) is used. This verifies the address of the person who is claiming to own the card. It checks the address provided by the user with the one on file with the credit card company.

Also collect the security number of the card, this is the 3 digit code on the back of the card. This is often referred to by the acronym CVC or CVC2, (as well as several other similar ones).

What If Chargeback Procedures Have Started?

First of all make sure you respond quickly. This can solve many problems in itself by allowing communication between the merchant and consumer. Also there’s a time limit on the procedure, so if certain steps aren’t taken within the time limit then a chargeback request will automatically be issued, or dropped.

Also try and understand when you have more to lose by fighting, especially if you have made a mistake. Although this can be very frustrating, sometimes it is better to let things go and save your valuable time and energy as well as protect your general state of wellbeing.

Whilst completely stopping chargebacks is sadly not possible, following this advice and applying good common sense will keep them to a minimum and at the least allow merchants to carry out business without being worried about chargebacks happening, or affecting their business.

Traditionally a small business, or local businessman’s first stop to find merchant services would always be with their local bank.

It’s simple really, they already know each other, there is already trust there. So why look elsewhere, not to mention the fact that the customer service has always been really good. And surely they will treat an existing customer to the best rates and fees that they can, right…?

Whilst it’s logical that this would be true, often the reality is very different. Firstly merchant accounts are not the main, or sole business of the bank. Merchant Account providers deal with merchant accounts all day every day, they know the business inside out whereas the Bank, or at least the representatives you’re dealing with don’t.

On the fees side often banks will charge application fees for a merchant account. Good merchant account providers don’t charge this application fee. Also, many banks are actually resellers of merchant account equipment, and or services. This means the fees will be higher with the banks cut included, and it also means that the customer service will not come from the bank, but through the service providers. Processing machines and other equipment are notorious for being much more highly priced through banks.

Customer service is vitally important for a merchant account, because any issues with the actual running of the account can affect a businesse’s ability to actually take payments and this can have very serious consequences.

As with all merchant account business the key is to always check and compare what is being offered to you. Get a full rundown of all the different fees that are associated with either applying for the account, or actually charged on the account once it is up and running. Then look at understanding the rates that are being charged to actually processing transactions.

Check if any third parties are being used for the services, and what mark ups may have been added. Ultimately, there is little to be gained by seeking to use merchant account services simply because they are located in a local area. However, it’s often a tactic used by companies to advertise their services to people who live in the local area.

The most important thing is to find merchant services providers that can offer high quality service and low rates and operating costs. These factors are not affected by a company being located close to a business. As long as the merchant can reach the relevant people at exactly the time that he or she needs to then that is much more important than proximity.

If you are unsure of how the pricing system works in the merchant account industry and need more information that will help you to make a decision with the rates and fees that are being offered to you by a bank, or any other provider of merchant accounts then check out this article on pricing for merchant accounts by clicking here. The type of pricing offered is key to whether a particular merchant processor, or bank should be chosen as a provider.

Simply put a Payment Gateway is an essential piece of online payment processing. It is a software application that allows the secure transfer of information between the online payment processesor, whether it is an ecommerce website, phone or mobile payment processor etc and the credit card processing bank.

The online payment gateway is a part of having a merchant account, but they are not the same thing. The merchant account is the term for the overall process of being able to take credit cards and the payment gateway is a software application that allows the process to occur securely.

The most popular payment gateway is currently authorize.net, however there are other companies on the market, including CDGcommerce and Quantum Gateway and often one of these will be offered as part of a bundle package from a merchant account company when applying for a merchant account.

Some of the main features offered by payment gateways are:

A Virtual Terminal
This is an online version of a credit card processing machine. It means that the a customer’s card details can be input online either via a web form, or browser and allows the transaction to be processed online as it would be normally.

Secure Processing
The credit card information has to be encrypted before it is sent to the processing bank to prevent fraud.

Recurring Billing
For companies that offer memberships, or subscriptions the option to process payments on a recurring basis is necessary. A payment gateway makes this possible.

PCI Compliance
PCI compliance is a very hot topic at the moment and is absolutely necessary to avoid hefy fines and there are payment gateways on the market that make the process of being PCI compliant much more simple. They do this by processing transactions on the gateway’s servers for ecommerce merchants without secure websites.

It basically means that no credit card data touches the software, servers or networks of the merchant, so they do not have to worry about achieving full PCI compliance, (more information on PCI compliance can be found here).

This is most beneficial for small merchants who can’t afford the estimated $50k to $250k needed to make an ecommerce website fully PCI compliant.

CDGcommerce is one such company that offers this at the moment and they insure that no card data comes into contact with, or is stored on any client server, network or software.

After choosing a payment gateway, it’s then important to look at payment gateway integration. This is basically how the payment gateway connects to where the customer enters their card details. This is normally in the form of a shopping cart. With major shopping cart providers such as Shopify or

• Tweet