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Table of Contents

Lead Story

The convergence of traditional and alternative payments


Industry Update

Effect of proposed debit regs on ISOs

Fed's proposed interchange cap dings AmEx

Merchant sues U.S. Bank for alleged data breach cover-up

EMS gives back during holidays


Research Rundown

Selling Prepaid

Prepaid in brief

PPS' CEO sees changing landscape ahead

How Fed draft rules might affect prepaid


Payment prognostications for 2011

Brandes Elitch
CrossCheck Inc.

Who owns the merchants?

Sarah Weston
Jaffe, Raitt, Heuer & Weiss PC


Street SmartsSM:
Will leasing make a comeback? - Part 1

Ken Musante
Eureka Payments LLC

Risk management and PCI

Tim Cranny
Panoptic Security Inc.

Evaluating the value (and cost) of training

Jeff Fortney
Clearent LLC

Marketing resolutions for the New Year

Peggy Bekavac Olson
Strategic Marketing

Company Profile

ISTS Worldwide Inc.

New Products

Robust gateway for e-commerce

CCS ePay
Charge Card Systems Inc.


Bring in the year with steely resolve


10 Years ago in
The Green Sheet


Resource Guide


A Bigger Thing

The Green Sheet Online Edition

January 10, 2011  •  Issue 11:01:01

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Who owns the merchants?

By Sarah Weston

In the payments industry the phrase "owning the merchants" is not readily understood by those unfamiliar with industry practices. Even experienced payment professionals often disagree on what it actually means. This article will discuss the ever-evolving definition of "merchant ownership" and give you tips about which ownership rights may be most valuable to you.

What does owning the merchants mean in concept?

A red flag goes up in my mind each time I am asked to draft an ISO agreement and my client informs me he or she has verbally agreed with the processor that the ISO will own the merchants. Drafting this arrangement on paper is easier said than done because the two parties often have not worked through the details of what owning the merchants really means.

I understand owning the merchants to mean that the ISO will, among other rights and obligations:

Or the ISO may have some combination of these rights, subject to card organization rules.

What does owning the merchants mean in practice?

If you were to ask the processor involved in the previously mentioned verbal agreement what it meant when it agreed the ISO would own the merchants, you would likely get a different answer than the list provided herein.

This is because merchant ownership means different things to different people. Even if your processor has agreed to allow you to own the merchants, the rights the processor will agree to give you in your contract can often be very different.

For instance, while the processor might be amenable to language that says the ISO owns the merchants and has a direct relationship with them, if there is a broad anti-assignment clause tucked away at the end of the ISO agreement (a clause that requires the ISO to obtain written consent before assigning the agreement or any right under that agreement), in effect the ISO might be prohibited from ever moving the merchants.

What kind of ownership is that? It's like buying a car that you are only allowed to sell if your boss gives you written consent to do so - at his or her sole discretion.

Even if you and your processor are on the same page regarding who owns the merchants, as well as what that means in practice, unless your ISO agreement clearly explains that agreement on paper, you have no guaranty that a third party will understand your arrangement the same way you do.

This is problematic. What if something goes wrong in your relationship with the processor and one party sues the other? In that case, a judge or jury might end up interpreting what your contract means.

The jury reading your contract probably has no working understanding of the payments industry, including the concept of merchant ownership, and thus would have no way to understand the agreement between you and your processor unless it is set forth clearly and simply in your ISO agreement.

Since no two groups of industry players tend to agree on specifically what merchant ownership means, the only way to protect yourself is to clearly define this relationship in the contract between you and your processor. If you don't, you might be in for an unpleasant surprise when you attempt to exercise your ownership rights.

Other related rights

Other rights related to merchant ownership include:

To make sure you can exercise rights in accordance with your idea of merchant ownership, hammer out the details of what it really means to have merchant ownership so you, your processor and any third parties reading your contract see the same picture.

The recommendations herein are general suggestions; they are not a substitute for legal advice. For specific information, consult experienced legal counsel. Sarah Weston is an attorney at Jaffe, Raitt, Heuer & Weiss PC and advises businesses on contract and regulatory issues in the merchant acquiring, stored value, automated clearing house and payment systems industries. You can reach her at 248-351-3000 or at

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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