By Adam Atlas
Attorney at Law
Sooner or later every merchant level salesperson (MLS) will want to sign a merchant who is already procuring services from the MLS's processor. Some companies welcome this type of portfolio churn; others consider it a breach of the agent agreement.
Here are seven tips to help you know your rights and obligations relative to soliciting your processor's merchants.
Before you fully engage in the sales process, ask merchants who provides their bankcard processing. Merchants are often confused about who is handling their processing, but you should gather as much information as merchants are able (and willing) to share. Note that a large processor logo may appear on a merchant's POS device, but the merchant may have been signed by an ISO soliciting for that processor – perhaps even the ISO that pays you as an agent.
It might help to google the merchant, search local business directories and make phone calls to identify the merchant's payments industry relationships. Clarifying a merchant's status will help you adapt your sales pitch accordingly.
It behooves processors to know whether their agents are soliciting their merchant base. And when asked to do so, some processors will inform their agents if a given merchant is already doing business with them. Some will also provide information about whether the merchant was signed directly by them or through an ISO of theirs.
This information will help an MLS to decide if an account should be solicited and, if so, what kind of pitch might be best.
Suppose you are promoting the services of Acme Processor. A well-drafted nonsolicitation clause in your agent agreement will clarify whether you are allowed to re-sign a merchant who is already party to a merchant agreement with Acme Processor and its bank. However, many clauses are not well-drafted.
The main purpose of a nonsolicitation clause is to prevent agents from soliciting merchants in order to move them to another bank. But the clause (together with the rest of the agreement) may permit an agent to re-sign a merchant who is already processing with a given processor or bank.
Distinguish between what your nonsolicitation clause says about specific merchants you have referred to the processor, as well as the much larger group of all merchants procuring services from the processor. You may be allowed to re-sign merchants from the larger group, but perhaps not those you brought to the processor yourself.
Be careful not to breach a nonsolicitation clause in your agent agreement. Processors are especially sensitive when agents do this – and rightly so. Note that some processors have so much market share that they are legally prohibited from preventing their ISOs and MLSs from soliciting into their portfolios.
If your agent agreement permits you to re-sign merchants who are already with your processor, ask whether your processor is set up to process applications from its own merchants.
During that conversation, try to get a feel for the price range other MLSs work within when they compete with you for your merchants. It's helpful to know what other people have in their sales toolbox.
Some processors will inform MLSs when another agent attempts to re-sign one of their merchants. Suppose Agent Albert signed Joe's Pizza with Acme Processor a couple years ago. Then, along comes Agent Ben, who is also an agent for Acme. Agent Ben approaches Joe's Pizza and wants to re-sign the merchant with Acme. As part of this service, Acme will ask Agent Albert whether he is willing to let Agent Ben re-sign Joe's Pizza before Acme takes any action. Naturally, very few agents in Albert's shoes would permit the merchant to be re-signed.
Processors should all employ this common-sense service. It can reduce unnecessary attrition in MLS portfolios and build loyalty among agents working for the processors. Ask your processors and ISOs to offer it to you.
Some processors that allow their agents and ISOs to solicit merchants brought to them by other agents or ISOs will still require you to give those ISOs and MLSs a grace period – say 10 days – to save the account before you can move it elsewhere. If you have this duty, make sure to allow the beneficiary of the grace period the full 10 days, or whatever period applies, to have a good faith chance to save the account.
Some processors may permit specific agents to be shielded from a general policy allowing their agents to re-sign one another's merchants. When negotiating an MLS or ISO deal, ask whether the processor will provide you protection from its other agents seeking to re-sign your merchants. It's one thing to lose a merchant. It's another thing to lose a merchant to a colleague who represents the same processor as you.
Once you believe you know your rights regarding solicitation of merchants already working with your processor, meet with an MLS with whom you are friendly who also works for your processor. Discuss that individual's policy on the topic. Specific terms of the other agent's agreement and yours are very likely subject to confidentiality clauses. But you can ask the other agent if he or she can board merchants who are already boarded with your processor. Knowing another agent's position may be helpful in understanding your own.
Many ISOs and MLSs do not know whether they can re-sign merchants processing with their current processors. If you're in this camp, identifying your parameters in this regard can help you plan better business strategies and more effective methods of reducing attrition.
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, email Adam Atlas, Attorney at Law, at email@example.com or call him at 514-842-0886.
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