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Direct Response Marketing

ERA: Electronic Marketing's Changing World

1 Jan, 2004 By: Response Contributor Response

Electronic Marketing's Changing World

Every day thousands, if not millions, of card transactions occur worldwide in the land of direct response. Merchants accept payments every second from consumers interested in purchasing the latest product or gadget on the market. In the past, the question of whether or not the method of payment was a debit or credit card was a non-issue. That is - until now.

The Technicalities of Reg. E - The Issue on the Table

As many of you are aware, the Federal Trade Commission (FTC) recently increased regulatory scrutiny regarding the acceptance of debit cards for multiple or continuity payments. The FTC contends that use of debit cards in these transactions is subject to the written authorization requirement provided in the Electronic Funds Transfer Act.

While at first this interpretation doesn't seem to drastically affect the industry, it greatly alters the circumstances of how future transactions will occur. In addition, conditions of the recent Mastercard/Visa antitrust settlement dramatically increase the likelihood that merchants will be able to distinguish between debit/credit cards in the near future, or may be legally presumed to make that distinction.

What does this mean to the industry? It is evident, regardless of the outcome of these interpretations, merchants will soon have a greater ability to determine the type of card a consumer utilizes for a transaction.

Signature Requirements From Federal Reserve Board

What is the requirement to be Reg. E compliant under present regulation? Currently, debit cards are completely acceptable for initial charges, but merchants must obtain a signed or similarly authenticated written receipt before making a recurring charge to a debit card, as well as provide the consumer with a copy before a recurring charge is made.

Plain legal language states that a recorded electronic sound could meet the written agreement requirements; however, regulators have been reluctant to support this interpretation for telephonic transactions to date. Difficulty arises in the interpretation of this law, which regulators and merchants alike are trying to understand fully.

Next Step for Merchants and Marketers

Until now it has been almost impossible for a merchant to distinguish between debit and credit card transactions. However, as new technologies emerge, companies should review their practices with legal counsel.

Merchants need to identify if they have a problem and determine if an adjustment needs to be made. Today, there are methods out there that can help you stay within the provisions of the law, and a knowledgeable attorney can assist you in determining what's best for your business. Unfortunately, there is no one answer for all merchants, but instead, different business models will lead to different solutions.

ERA's Regulatory Efforts

From a merchant and marketer standpoint, the Electronic Retailing Association (ERA) is very concerned and is actively involved in securing the best possible outcome for the industry. The federal interpretation of Reg. E strives to protect merchants who maintain reasonable processes, and ERA's knowledge helps ensure that a wide spectrum of solutions is considered.

Through active involvement with regulators, legislators and coalitions alike, ERA works to build a better understanding among regulators, bringing the voice of direct response to the table.

Looking ahead, solutions are being developed to help merchants navigate this changing regulatory landscape. Unfortunately, it is no longer reasonable to assume that direct marketers' acceptance of debit cards isn't a daily reality. But as the world changes, companies need to be ready to adjust, adapt and overcome to continue to grow successfully.

Bill McClellan is the Electronic Retailing Association's (ERA) director of government affairs and is actively involved with advocating for the direct response industry and monitoring government legislation and federal regulation that affects electronic retailers. He can be reached (703) 841-1751, or via E-mail at

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