By David H. Press
Integrity Bankcard Consultants Inc.
I am often asked about merchant operating parameters set forth under card Association rules and regulations. As ISOs and merchant level salespeople (MLSs), you can find relevant information right in the terms and conditions section of your merchant processing agreement, including a list of prohibited merchant practices.
This is because the card Associations require that many of their rules be included in each acquirer's merchant processing agreement. This article will delve into rules about prohibited transactions, transaction minimums and maximums, surcharging, and cardholder identification.
Here is a question posted recently on the GS Online MLS Forum:
"I've often heard that it's against the Visa and MasterCard rules and regulations for merchants to process their own personal credit card through their merchant accounts. In reviewing the rules and regulation documents put out by Visa and MasterCard, I've not been able to find anything."
This issue falls under the card Association rules stating 1) merchants are prohibited from making cash disbursements and 2) merchants are allowed to accept cards only for transactions that are bona fide sales of goods or services to third parties.
Only financial-institution card Association members may disburse cash. This can be both at their facilities (for example, bank branches) and through authorized agents.
Also, card Association rules state neither a merchant nor a member bank may accept any transaction that represents the refinancing or transfer of an existing cardholder obligation that is deemed uncollectible or that arises from the dishonoring of a cardholder's personal check.
Another often asked question is, Can a merchant establish a minimum dollar amount for credit card transactions, such as $10?
Visa U.S.A.'s rules for merchants state, "Always honor valid Visa cards, in your acceptance category, regardless of the dollar amount of the purchase. Imposing minimum or maximum purchase amounts is a violation." Visa's rules are available online at www.usa.visa.com/download/merchants/rules_for_visa_merchants.pdf.
MasterCard Worldwide's rules state, "A merchant must not require, or post signs indicating that it requires, a minimum or maximum transaction amount to accept a valid MasterCard card."
Furthermore, if MasterCard becomes aware that any merchant has violated its restrictions pertaining to minimum and maximum transaction amounts, it will notify the merchant's acquirer of the violation. And it will request that the acquirer take action to ensure the merchant discontinues the practice within 10 business days - at all locations covered by the governing merchant agreement.
Visa's rules provide that merchants must "always treat Visa transactions like any other transaction; that is, you may not impose any surcharge on a Visa transaction.
"You may, however, offer a discount for cash transactions, provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment."
Before pay-at-the-pump transactions became commonplace, gas stations often gave discounts to customers who paid with cash. That was perfectly acceptable. Fundamentally, the distinction between a surcharge and a discount is minimal.
MasterCard's rules provide that "a merchant must not directly or indirectly require any MasterCard cardholder to pay a surcharge or any part of any merchant discount or any contemporaneous finance charge in connection with a MasterCard card transaction.
"A merchant may provide a discount to its customers for cash payments. A merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used.
"A surcharge is any fee charged in connection with a MasterCard transaction that is not charged if another payment method is used. The merchant discount fee is the fee the merchant pays to its acquirer to acquire transactions."
May merchants ask cardholders for official, federal or state government-issued identification? Visa rules do not preclude merchants from asking for cardholder identification.
But merchants cannot make providing identification a condition of acceptance. Therefore, merchants cannot refuse to complete purchase transactions simply because cardholders refuse to provide identification when asked.
According to Visa, merchants should not ask for identification as part of their regular card acceptance procedures. Also, it is illegal in several states for merchants to write cardholders' personal information, such as an address or phone number, on a sales receipt.
If a merchant is suspicious about a transaction or feels the need for additional information to ensure a cardholder's identity, the merchant should make a Code 10 call.
Code 10 authorization requests can alert card issuers to suspicious activity, without alerting customers. During a Code 10 call, a retailer speaks with a card issuer's special operator, who provides instructions on any necessary action. This type of authorization request is the most likely to result in a call to law enforcement.
MasterCard rules provide that merchants must not deny MasterCard-card transactions solely because cardholders refuse to provide additional identification. However, merchants may require additional identification from cardholders if it is required for shipping purposes.
Merchants using Address Verification Service may require cardholders' ZIP or postal codes to complete cardholder-activated POS transactions, or cardholders' addresses and ZIP or postal codes to complete MO/TO and e-commerce transactions.
In-depth answers to these and other questions merchants and MLSs often ask are available online in MasterCard's "Merchant Rules Manual".
Download these files so you can easily refer to them. Also, send the documents mentioned or the links found in this article to your merchants to demonstrate your superior customer service. 
David H. Press is Principal and President of Integrity Bankcard Consultants Inc. Call him at 630-637-4010, e-mail dhpress@ibc411.com or visit www.ibc411.com.
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