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A Thing One

This Story Will Affect You!

Do you know that Visa U.S.A. has recently changed the rules for Acquiring Program Capital requirements?

The previous rule generally stated that Visa allows bankcard processing up to 100% of weekly Tier 1 capital for all merchant activity, and 25% of monthly Tier 1 capital for high-risk merchant activity (defined as MCC 5692, 5966, and 5967). The change to this rule may affect you because Visa has limited all acquirers (effective 3/1/01) to 20% of their bank’s Tier 1 capital on a weekly basis. Additionally, no more than 15% of the business can come from “high-risk merchant activity” which is now defined as MCC:

3000-3299           Air Travel

4511                  Airlines not listed within 3000

4121                  Taxicabs and Limousines

4722                  Travel Agencies and Tour Operators

4816                  Computer Network/ Information        Service

5961                   Mail Order Houses

5962                   Direct Marketing: Travel - Related Arrangement Services

5963                   Door-to-Door Sales

5964-5969           Direct Marketing

7298                  Health and Beauty Spas

7372                  Computer Programming, Data Processing, and Integrated Systems Design Services

7997                   Membership Clubs, Country Clubs, and Private Golf Courses

In response to the rule change, Tim Jochner of Innovative Merchant Services and Ken Musante and Jamie Savant of Humboldt Bank have formed a committee called B.A.R.C. (Bankcard Association Rules Committee) made up of ISOs and acquirers. The committee has already conducted several conference call meetings, sent correspondence to all FDR advisory members, and is looking for more members with similar concerns prior to their tentative meeting with Visa on March 23.

B.A.R.C. reports that the general consensus of Visa is that to comply, the recognized banks would need to obtain more capital, sign as an agent with a larger bank, or discontinue business with part of their merchant portfolio. The new rule only seems to pertain to smaller community banks and none of the above options are reasonable to them; it may not be cost effective for these banks to raise capital, and if they sign as an agent they will give up the majority of income while retaining contractual liability for any losses. Additionally, closing accounts means the loss of revenue for these banks and their ISOs. B.A.R.C. feels the rule change unfairly benefits larger banks because 1) these banks are not affected by the rule and 2) the rule results in less competition for larger banks.

B.A.R.C. members stress that in order to get anything changed at Visa, banks and ISOs must get involved and must encourage the support of other banks and ISOs. The group has established goals, the largest of which is changing the “High Risk Acquirer” rules. Other goals include attracting more members and establishing an acquiring member on Visa’s board. B.A.R.C. members agree that there is a definite regulatory concern and the rules appear to be a clear violation of antitrust laws. Despite this concern, the group wants to not pursue legal action as a first step, although the makings of a class action suit seem to be there should B.A.R.C.’s efforts fail.

Members of B.A.R.C. include:

  • Interim President: Tim Jochner of Innovative Merchant Services

  • Interim Secretary: Ken Musante of Humboldt Bank

  • Presenter to Visa: Pat Kilkenney of National Bank of the Redwoods

If you would like to attend the next conference call meeting, and be present for the presentation to Visa, contact Ken Musante at or (707) 269-3200.

Note: The domain names and have been registered but there are no plans yet for a Web site. B.A.R.C. is also presenting their concerns to the ETA Board. They wish to become a part of the ETA—perhaps an adjunct committee. They do not wish to compete with the ETA but rather use their membership and support for a common concern.


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