The Green Sheet Online Edition
May 29, 2007 • Issue 07:05:02
To certify or not to certify: That is the MLS question
Let's talk about merchant level salesperson (MLS) certification. There's been much discussion about this possibility in the payments industry over the years. As yet, nothing has been done.
Today, no certification or license is required to sell transaction processing to the public on behalf of registered ISOs and processors. Unfortunately, this makes it easy for unscrupulous MLSs to take advantage of the system and give the rest of us a bad reputation.
Many people say regulation is overdue. But just as many are opposed to the idea. So, the issue is widely debated.
Here are some questions I often hear agents ask about this topic:
- Who should be responsible for regulating this market?
- Would regulation discourage new MLSs from joining the industry?
- Should we create a list of "bad" agents?
- If we don't join the MLS regulation bandwagon, will we regret it later?
I will explore each of these in this article.
Who should be responsible for regulating this market?
This question was recently debated on GS Online's MLS Forum. Here are some suggestions industry veterans offered:
"I believe in certification. In my view, the acquiring banks [sh]ould not be allowed to accept any applications from anyone that is not certified. This would stop a lot of these companies that hire people, feed them little to no information and have them sell merchant services." – MLS Forum member GMartin
"Certification must start at the top, and must be government-recognized, and federally approved to carry any weight." – MLS Forum member Marketelinc
"I agree it should start at the top. There should be some form of standard that all ISOs have to adhere to." – MLS Forum member FastTransact
A few MLSs suggested that Visa U.S.A. and MasterCard Worldwide should mandate and manage agent regulation. No matter what entity does the actual regulation, many industry insiders agree that at some point, merchants are going to demand proof that MLSs trying to sell them processing are not con artists.
It is unfortunate that corrupt MLSs have preyed on many unsuspecting merchants. It only takes a few of those to muddy the waters. I am amazed daily at the unethical tactics some ISOs and MLSs use to get deals.
Would regulation discourage new MLSs from joining the industry?
Some say requiring MLS certification would present a significant hurdle for new MLSs that would decimate their business prospects. And it would be more difficult and expensive for newcomers to get trained.
Additionally, agents already have to wait to receive residual income. It takes at least a full month's processing to see money flow in from new merchant accounts. Certification would only prolong this timeline.
Certification would also involve costs. So, it would take longer for most MLSs to recover their initial investment.
On the positive side, certification requirements may scare less-than-honest agents from entering this market. And the threat of losing certification may discourage "bad apples" from taking advantage of the system if they do enter the payments space.
Should we create a list of "bad" agents?
Some industry leaders have suggested we can clear the industry of n'er-do-wells without resorting to a certification process. A list of unethical MLSs is one idea. It would replicate the Member Alert to Control High-Risk (MATCH) list, which is a card Association-maintained list of merchant accounts that have been terminated for cause.
Jared Isaacman, Chief Executive Officer of United Bank Card Inc., was quoted on this topic in "List conundrum: Bad blood blues or bona fide bad apples?" in The Green Sheet, Sept. 25, 2006, issue 06:09:02.
"Every ISO, processor and bank would subscribe to an independently managed list of 'bad' agents," he said. "This would have to be managed exceptionally well with a strict criteria on how an agent can be added or removed ... But if it was accomplished correctly, I guarantee it would be a big hit."
Isaacman is not alone. Many in the industry think such a list would be useful. And if it were managed by the card Associations, it would be credible and reliable.
I am doing this on a small scale with a group of like-minded ISOs. We share information informally. If we have bad experiences with MLSs who break the rules and practice unethical sales techniques, we tell one another.
I define unethical sales techniques as deceptive practices used to obtain business: forging signatures on contracts, changing fees on already executed contracts, and nondisclosure of fees, terms and cancellation fees, for example.
We have found that rogue agents used to be few and far between, but their numbers are increasing.
Until something more formal is introduced, we will continue to protect our businesses in this way. The information that we share is solely used for weeding out problem MLSs and is strictly confidential.
As an ISO, I feel responsible for what my MLSs do under my brand. (I often encourage MLSs to do the same due diligence when trying to find an ISO to partner with: Ask for references and do some research on that ISO.)
If we don't join the MLS regulation bandwagon, will we regret it later?
Some fear that if we don't help establish MLS regulation ourselves, we will be stuck with a certification process that is strict and overbearing. Here is one such view from the MLS Forum:
"Please don't sit on the sidelines and criticize. They are begging for volunteers to work on and form committees. We can be part of the driving force that shapes our future or we can sit on our hands, retorting it ... and when the changes come about, you'll be sitting there, having to take them like a large dose of castor oil from a rusty spoon." – MLS Forum member Slick Streetman
Slick has a point. It may be to our collective advantage to help put a system together. The more participation there is, the better the solution will be. Being active in this discussion will keep us all in the loop.
Many great ideas have come from the MLS Forum, and many of you have private-messaged me. Let's keep the discussion going.
Until next time, I hope to see you on the streets.
Dee Karawadra is the founder, Chief Executive Officer and President of Impact PaySystem, based in Memphis, Tenn. He and his team have a wealth of knowledge on the merchant services industry, with a niche in the petroleum market. Dee's experience on the street as an agent has guided him in laying a foundation for an agent program that is both straightforward and lucrative for his agents. Contact him at 877-251-0778 or email@example.com.
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