By David H. Press
Integrity Bankcard Consultants Inc.
Last month I answered some often asked questions about what is permitted for merchants under card Association rules and regulations. This month I am addressing more questions you, as ISOs and merchant level salespeople (MLSs), have asked about those requirements.
Some of you want to know if merchants can refuse to accept cards that do not swipe through their POS terminals.
Visa U.S.A.'s rules and regulations do not address this issue. So it would not be a violation to refuse to take a card that cannot swipe successfully. However, Visa requires merchants to make a manual imprint if they do process such transactions.
Remember, key-entered transactions are fully acceptable. But they are associated with higher fraud and charge-back rates. In addition, when transactions are key-entered, certain security features are not available, including verification of expiration date and Visa's Card Verification Value 2 program, which employs cryptography to enhance security.
Visa provides the following instructions to merchants for instances in which cards do not read when swiped:
The imprint can be made either on the sales receipt generated by the terminal or on a separate manual sales receipt form signed by the customer.
For more information about situations in which magnetic strips cannot be read, see page 21 of the Rules for Visa Merchants: Card Acceptance and Chargeback Management Guidelines. The document is available on Visa's Web site at www.usa.visa.com/download/merchants/rules_for_visa_merchants.pdf.
ISOs and MLSs have also asked whether merchants can process transactions for additional businesses they, their spouses or friends may own.
The answer is no. Merchants should deposit transactions only for the business bound by the applicable merchant agreement. Depositing transactions for any other business is called laundering, or factoring, and is not allowed. It is a form of fraud associated with high chargeback rates.
Factoring usually occurs when a merchant is approached by a third party to run transactions on its behalf. The merchant then pays the money to the third party and gets stuck for the chargebacks.
Retailers that factor usually lose the right to process credit cards and can be added to the Member Alert to Control High-Risk database. Called the MATCH list, it contains information on terminated merchants. You should set up a separate account for each business that will be accepting bankcard payments (and make more money, too).
Merchants often think they can make multiple charges on a card to complete a sale. This is called a split sale and is very risky to merchants.
Visa advises merchants to prepare one sales receipt per transaction, using the full transaction amount. Retailers are not allowed to split the cost of a single transaction between two or more sales receipts, using a single cardholder account, to avoid authorization limits or declines.
To help resolve rule violations that may not be covered under their chargeback rules, the card Associations have established the compliance process, which offers members another dispute resolution option.
For example, the Visa compliance process can be used when all of the following conditions are met:
Many compliance violations are listed for merchants as prohibited. Following are some of the most common compliance violations:
The last compliance right listed can be very valuable to merchants. Yet, it is underutilized. Almost every high-chargeback merchant whom banks and ISOs ask me to review has a large number of chargebacks post for transactions in which the merchant has issued returns.
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