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Direct Response Marketing

Support Services: Credit Card Processing Rules Are Changing Fast

1 Jul, 2014 By: Curtis Kleinman Response

Forget what you know about applying for a merchant account. Recent changes in the rules have caused marketer and merchant confusion. Those who will notice the most changes are those who offer ingestible products, use upsells, and sell with a trial and continuity model — as well as those juggling multiple merchant accounts.

Where and how you apply for your merchant accounts is more important than ever. Many have grown accustomed to the ease of opening multiple merchant accounts with minimal effort. Many have had great success leveraging the balance of one bank account to open multiple merchant accounts. But banks are finding more reasons than ever to reject products and their owners. Certain products are now much harder to underwrite and fewer banks will accept them.

Consequences of Choosing the Wrong Bank
At the same time, choosing the wrong bank leaves your business open to a variety of bad potential consequences. You can lose your ability to process payments completely at your busiest time.

One marketer decided to use his local bank instead of a direct response-driven bank. At first, all was fine. Eventually, the bank had less comfort with the type of fast activity direct response brings. Soon after airing a television commercial, this merchant had 12,000 customer orders and nowhere to process them. The local bank didn’t anticipate the volume and thought the merchant simply had high hopes. This heavy volume raised a red flag, which halted his merchant account the first day of processing.

Processors Sharing Underwriting
A number of payment processors who use Deutsche Bank on the back end now share one underwriting department. These processors often won’t allow merchants to open more than one merchant account per website or product offered.

In another recent change, some processors are now allowing only two merchant accounts per established business entity or person. The processing volume they’ll allow to certain merchants also has been reduced. For many, this lower processing volume means less media spending to adjust. Applying to multiple processors who share the same bank can cause immediate rejection of your application. Thus you may be turned down for your best payment processing option.

Easing Your Way
Underwriters are examining a merchant’s corporation much more closely these days. Processing companies now must negotiate harder than ever on behalf of new clients and new corporations with no processing history. Established business entities showing no financial activity should expect banks to dig deeper into their personal information — especially if the merchant is considered high risk.

Every underwriting bank likes to see a well-funded bank account. Having all your financial paperwork ready, including tax returns, up-to-date financials and banking statements will also speed the application process.

Best practice guidelines from the card associations serve as self-regulation for merchants to follow. They include offering a proper refund policy, watching the claims you make and more. This is crucial, as the Federal Trade Commission (FTC) now monitors many business types more closely. The major issue is to assure advertising claims are substantiated by actual scientific research. Claims should not set unrealistic customer expectations.

Vendor Liability at Issue
Marketers who use deceptive practices are putting more people at risk than just themselves. There is a heavy emphasis on vendors knowing their customers. The FTC is taking on merchants and their vendors, including media agencies, Web developers and merchant processors.

The amount of money high-risk merchants earn often tempts their vendors to manipulate the system to keep their clients processing. As a result of FTC scrutiny, credit card processors have lost interest in certain types of business. Fast and decisive actions are being taken by banks to protect themselves, including insisting on higher reserves, examining paperwork more closely, asking for personal guarantees and enforcing chargeback limits. ■

About the Author: Curtis Kleinman

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