The Green Sheet Online Edition
August 11, 2008 • Issue 08:08:01
What is ISO registration anyway? Nearly everyone who operates an agent or ISO business and is not registered wonders, from time to time, if they should do so. Offered herein is information to help the unregistered make that decision.
What do the card networks say about registration? You need not read more than one ISO, agent, or merchant agreement to know that the rules of Visa Inc. and MasterCard Worldwide are the laws of the land in the merchant services business. Their rules are available on the Internet; they can also be accessed under the documents tab at www.adamatlas.com.
You probably have better things to do than read hundreds of pages of rules. So here is an excerpt of the Visa rule that pertains to registration:
"1.6.F.4.a: If materials displaying Visa-owned marks are used, a member [meaning the acquiring bank] must ensure that:
- The member is prominently identified by name and city adjacent to the Visa-owned marks.
- The material does not identify the third party [meaning the ISO or agent business], unless such organization or individual is prominently identified as a representative of the member, as specified in Section 1.11.A.5.c [meaning the ISO is registered]."
In plain English, the rule means an ISO cannot use its own name unless that name is registered with Visa. Many other provisions in these rules address the question of registration as well, but this one is perhaps most relevant in regard to it.
How to register
All merchant level salespeople who have direct relationships with banks, processors or registered ISOs may apply for registration. The application process takes about six weeks and depends on the level of support agents receive from their affiliated organizations, as well as the financial and business status of applicants.
The initial registration fee is approximately $10,000. Once agents are registered, an annual fee of about $2,000 is charged. Criteria, timelines and fees vary from acquirer to acquirer, so consult your bank, processor or ISO for appropriate registration guidelines
Benefits of registering
Being a registered ISO gives you the right to solicit merchants under your own name. If you are not registered, as stated in the rule quoted above, you may not refer to Visa as the sponsoring brand in relation to your own company name.
If you've been in the payments industry for any length of time, you probably realize it's virtually impossible to sell merchant services without being backed by a card network. Once registered, however, you can then build your own brand to distinguish yourself and the services you provide from your competitors.
For some organizations, being able to use their own name is not important. For others it is. If you are not registered, you must operate under the name of the registered entity for which you sell.
For example, if you are Agent Abe, and you sell for ACME Registered ISO of XYZ Bank, when you make sales calls, you cannot say, "Hi, I'm Agent Abe selling Abe's merchant services." Instead, you are required to say something like, "Hi, I'm Agent Abe of ACME Registered ISO, and I am offering you the merchant services of XYZ Bank."
Pitfalls to nonregistration
There's no harm in not registering. There is, however, much potential harm in using your own name or the Visa or MasterCard logos improperly - if you are unregistered.
The damage comes in the way of a fine, in the $50,000 range, levied by the card network on your acquiring bank. Of course, your bank passes along the fine to your processor, which, in turn, passes it along to your ISO, which finally passes it along to you.
These fines really do occur; it's not just an urban legend. A marked lack of procedural justice exists in the levying of fines because the person ultimately responsible for paying it does so before they have a chance to challenge its validity.
I am also unaware of any official mechanism for defending yourself against a fine. In my view, card networks should implement systems that permit agents to contest fines, much like merchants have the right to contest chargebacks. Unfortunately, an agent who is suddenly $50,000 poorer is not in a good position to take on any of the card networks, which are some of the largest, most powerful corporations in the world.
To be fair, the fines serve as a kind of stick to ensure merchants actually know from what business or entity they are purchasing merchant services.
The million dollar question
So, should you register? This is a question you have to answer for yourself in consultation with your processor. Thoroughly investigate whether registration will, in the long run, add value to your business.
Registration is not for everyone. The rules, however, are for everyone. Whether you register or not, be careful to follow the rules concerning the use of business names and card network logos - or a hefty fine might come your way.
In publishing The Green Sheet, neither the author nor the publisher is engaged in rendering legal, accounting or other professional services. If you require legal advice or other expert assistance, seek the services of a competent professional. For further information on this article, e-mail Adam Atlas, Attorney at Law, at