The Green Sheet Online Edition
November 28, 2011 • Issue 11:11:02
Is there such a product as chargeback insurance? If so, how does it work and who provides it? Also, do ISOs procure the insurance for themselves or do merchants get it for their businesses?
Kahn Payments Ltd.
It is The Green Sheet's understanding that chargeback insurance can protect risk-holding acquiring banks, processors and ISOs from losses when merchants are unable to cover their chargebacks. Most ISOs hold a certain amount of each merchant's funds in reserve to cover chargebacks.
Chargeback insurance products are designed to provide relief in the event a merchant's reserves become depleted and the ISO has to recover funds from the merchant (which may or may not be possible, depending on the state of the merchant's business and the amount of the chargebacks).
We have also heard of ISOs offering chargeback insurance to merchants. However, it is not our practice to recommend individual companies to our readers.
And we cannot point you to our Resource Guide listings to research insurance providers because no companies providing chargeback insurance are currently listed in the guide.
We suggest you check with your ISO to see if the company has such a product or knows of a business that does.
We also suggest you post any questions you have about chargeback insurance on GS Online's MLS Forum accessed via the Forums link on our home page, www.greensheet.com.
Working with multiple ISOs
I'm new to merchant services (eight months) and I've been sending all of my business to one ISO, but lately I've heard it's a good idea to work with more than one ISO, because it gives you flexibility to choose the best processor for the type of business you're boarding. Are there any rules against working with more than one ISO?
Merchant Level Salesperson
There is no overriding rule or card brand requirement stating that merchant level salespeople (MLSs) must work solely with one ISO. However, some companies may stipulate in their contracts that agents work only with them. This is the type of question every MLS should ask before establishing a working relationship with an ISO.
We highly recommend you consult an attorney with payments industry experience before signing a contract so you know exactly what your rights are under the agreement.
Also, when soliciting a merchant, you must be scrupulous about using the ISO business name registered with the card brands through the member bank that will be accepting card transactions from said merchant upon boarding.
For more information about this, see "ISO legal setup steps," by Adam Atlas, The Green Sheet, Jan. 24, 2011, issue 11:01:02.
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