Probably
the most common question we receive via e-mail, phone, fax, or snail mail
is"How do I become an ISO?" In issue 97:08:02 of The Green Sheet we
published an article about Visa and MasterCard registration and
regulations. As part of our efforts to supply our readers with current
data, we are updating the information and this article answers the
question How do I become an ISO? Please remember that The Green Sheet
does not recommend or endorse any particular product or service. If you
have further questions, feel free to e-mail, phone, fax, or snail mail
your queries to us!
To
become an Independent Sales Agent (ISA) selling Visa and MasterCard
credit/debit card processing, you must be an Agent of an Independent Sales
Organization that is registered as an BSP (Bankcard Services Provider) or
MSP (Member Service Provider) with the Visa and MasterCard associations
Sales Agents/ Professionals cannot register with the associations directly
because Visa/MC are associations of banks, not individuals. Independent
Sales Agents must register through a bank or an ISO.
Registering
All
Independent Sales Organizations selling Visa and MasterCard services must
be registered with the Visa and MasterCard associations because without
proper registration, an ISO will not be able to legally contract with a
member bank. If you are not able to contract with a bank, you may not be
able to protect your income should the bank or merchant portfolio be sold
in the future.
To
register with Visa and MasterCard, contact Visa at (650) 432-2933 or
www.visa.com, MasterCard at (914) 249-5367 or www.mastercard.com, or the
member bank you wish to represent. (A list of banks looking for agents is
published in the Resource Guide of The Green Sheet
and online at www.greensheet.com.)
If
you do not wish to sell Visa and MasterCard services, it is possible to be
an ISA for American Express, check conversion, check guarantee or
verification, Discover Card, hardware or software, phone cards, RCK,
scrip, and other financial services programs without registration, as long
as you are not selling any Visa or MasterCard services or products. For
example, Discover has a program for the ISO community called a Referral
Acquisition Program (RAP). RAP allows ISOs to fax referrals to Discover
Card. Discover then calls the merchant to sign them up, quotes rates, and
finalizes each sale. The ISO is paid 40% of the $25.00 Discover membership
fee collected from accounts. If you are interested in becoming an ISA for
any of these products some companies to contact are listed below.
CrossCheck,
Inc.
Tiffany
Lucas
Assistance
Vice President
ISO
Relations
(800)
654-2365
www.cross-check.com
eFunds
Corp.
Steve
Eazell
Business
Development Executive
(800)
558-6980 x5432
www.efunds.com
Discover
Card
(800)
347-6673
www.discovercard.com
Which
ISO is Best?
The
decision of which bank or ISO to work for is a personal one. First, you
will need to know what you want from an ISO. Items to consider, and ask an
ISO about, include specific markets served, benefits, training, leads,
Internet processing, high-risk businesses, merchant help desk, the time it
takes for a merchant application to be approved, and what percentage of
merchants are turned down. You will also need to inventory what you can
offer an ISO, such as industry knowledge, sales experience, cold calling
skills, integrity, communication skills, etc.
You
will want to inquire about what types of merchants a particular ISO serves
and how it charges those merchants. The card associations charge merchants
interchange. The interchange is the fee paid by the card accepting bank to
the card issuing bank and is a percentage of each sale. ISOs compensate
their agents with varying degrees of revenue splits beyond these costs.
The rates are different for different types of merchants and industries.
For example, a telephone order business will have a higher rate than a
traditional storefront and who you sell to can affect your income
potential. Also, many ISOs charge merchants transaction fees, statement
fees, and monthly minimums, which may influence how and what types of
merchants you prospect. Before contracting with an ISO you should be aware
of their specific charges and policies in these areas.
Of
course, you will want to inquire about a particular ISOs residual plan.
Not only do you want to know if they offer residuals but if so, are they
vested or non-vested? Are they for the life of the account or only for how
long your work for that ISO? Are they contingent upon a quota? Do they
take effect after a probationary period?
All
of the above questions can only be answered by each specific ISO. However,
to help you in your research, a list of ISOs Looking for Independent Sales
Agents is published in The Green Sheet
magazine and also online at www.greensheet.com.
Resources
If
you have additional questions, log on to www.greensheet.com and visit The
Green Sheet forum. Here you can post questions and concerns and network
with other ISAs and ISOs. When you are ready to start job-hunting, visit
the classified section of the site and see who is hiring! For additional
help, a partial list of industry resources follows.
Bancard
Consulting Group
Bernie
Cavanaugh
President
and CEO
(800)
801-9552
www.bancardconsulting.com
Check
Payment Systems Association
(202)
857-1144
www.cpsa-checks.org/cpsa-checks/index.html
Credit
Card Management magazine
(800)
535-8403
Electronic
Transactions Association
(800)
698-5509
www.electran.org
(Hosts
semi-annual meetings, see issue 00:09:02 Also publishes Transaction Trends
magazine)
MasterCard
(914)
249-5367
www.mastercard.com
Visa
(650)
432-2933
www.visa.com
Bankcard
Association Regulations
Visa
Regulations
Visa's
Agent Registration Program requires Visa Members to register all
Independent Sales Organizations (ISOs), Third-Party Servicers (TPSs), and
Independent Contractors (ICs) contracted to perform bankcard related
services.
Visa
defines ISO, TPS, and IC as follows:
ISO:
an organization or individual, which is not a Member, whose bankcard
related business relationship with a Member is (i) Merchant solicitation,
sales or service and/or (ii) Cardholder solicitation.
Third-Party
Servicer (TPS): an
organization which (i) is not a Member, (ii) is not directly connected to
VisaNet, and (iii) provides response processing for Visa program
solicitations, transaction processing, data capture, and other backroom
processing functions (i.e.: chargeback processing, risk/security
reporting, and customer service).
Independent
Contractor (IC): an
individual (1099 employee of either a Member or an ISO) whose bank
card-related business relationship is with a Member or an ISO and whose
activities involve Merchant solicitation, sales, or services, and/or
Cardholder solicitation services.
Visa
Registration
To
register a third party, Members must complete the "Independent Sales
Organization/Third-Party Servicer/Independent Contractor Registration" form
and send it to Membership and Records Administration for processing. Upon
completion of the registration process, all registration information will
be housed in the Agent Reference File.
Prior
to submitting the Exhibit VV, Members must 1) query the Agent Reference
File by faxing at request to Visa U.S.A. Agent Registration Coordinator at
650-432-1198 2)perform a background investigation of the ISO/TPS,
including verification of financial responsibility of the principals to
ensure that there is no significant derogatory information, and 3) perform
a site inspection of the ISO/TPS business location, including verification
of inventory, if applicable, and review of solicitation or sales
materials.
After
registration is complete, the Visa U.S.A. Operating Regulations require
the registering Members to comply with regulations in the following areas:
1.
Notification of Changes in Third Party Relationships
Members
are required to notify Visa of any change in an ISOs, TPS, or ICs
registration information or relationship within three business days.
2.
Member/Third Party Contract Requirements
Any
contract between the third party and the Member must be executed by an
officer of the Member and must contain at least the substance of the
following provisions. The following functions must be controlled by the
Member:
-
Review and approval of Merchants
-
Approval of Cardholder applications
-
Establishment of Merchant fees with respect to Visa Transactions
3.
Third Party Subcontracting
Only
registered third parties, who maintain a direct written contract with a
Member, may perform services on behalf of a Member. In addition, third
parties may not permit use of the Visa Card Program Marks by any of its
own third parties.
4.
Third Party Records Retention
Members
must keep a file on each third party that contains all applicable
documentation and the file must be retained for two years following
discontinuance of the relationship and must contain the reasons for
discontinuance.
5.
Merchant Settlement
Members
are responsible for ensuring that merchants receive payment for the drafts
they deposit. Processors that have been (i) designated by a Member via the
Processor Registration and Designation form and (ii) maintain a direct
link to VisaNet are the only nonmembers allowed to participate in the
settlement process.
Visa
Fees
Initial
Registration Fees:
-
Independent Sales Organization: $5,000 per relationship
-
Independent Contractor: $1,000 per relationship
-
Third-Party Servicer: $5,000 per Third-Party Servicer
Annual
Registration Fees:
-
Independent Sales Organization: $2,500 per relationship
-
Independent Contractor: $ 500 per relationship
-
Third-Party Servicer: $2,500 per Third-Party Servicer
(In
a calendar year a Member will not be required to pay both the initial and
annual fee.)
Conversion
Fees:
-
Members who contract with third parties as a result of a portfolio
acquisition, must re-register the ISO/TPS (Exhibit VV) and will be
assessed a conversion fee, rather than the initial registration fee listed
above. ISOs and TPSs will be converted for $500. ICs will be converted for
$100.
Fines:
A
Member which fails to comply with the requirements of the Agent
Registration Program will be fined. Such infractions include the
following:
1.
Noncompliance with Section 9.19A, which requires all Members to perform
the following three steps prior to contracting with an ISO, IC, or
Third-Party Servicer:
-
Query the Agent Reference File
-
Conduct a Background Investigation of the third party
-
Perform a site and inventory inspection
2.
Noncompliance with Section 9.6.B, which requires all Members to register
and pay fees for all ISOs, ICs, or Third-Party Servicer providing services
on their behalf. In addition, Members must notify Visa of any change in
the relationship within three business days.
Agent
Registration Program fines are as follows:
-
$10,000 for the first infraction
-
$20,000 for the second infraction in a five-year period
-
$50,000 for the third infraction in a five-year period
Visa
Trademark Usage
Member
Identification
Any
correspondence, supplies, or solicitation materials (including those to be
used for broadcast or oral solicitation) must prominently identify the
Members name and the city in which the Member is located. In addition, all
Visa Members must ensure that all solicitation material distributed by a
registered third parties comply with the following Member identification
guidelines:
-
The Members name and city must be prominently identified adjacent
to the Visa Marks.
-
The third party must be identified as a representative of the Visa
Member.
-
All solicitation materials must clearly disclose that any
Cardholder/Merchant Agreement is between the Visa Member and the
individual Cardholder and/or Merchant.
-
All Cardholder solicitation materials must clearly state that the
Member, not the third party, is the Issuer of the Visa card.
Visa
General Requirements
1.
The Member or its registered third party may not distribute any
solicitation materials that reference bankruptcy, insolvency, or any
similar circumstance.
2.
All ISOs, ICs, and TPSs are prohibited from using the Visa mark on
letterhead, stationery, or business cards.
No
Member, either directly or indirectly, may appoint or permit as its third
party, for either cardholder or merchant solicitation, an organization
which the Board of Directors deems to be a competitor of the Visa System.
This includes but is not limited to American Express Company and their
respective subsidiaries and affiliates.
Each
Visa Member must ensure that any use of the Visa Card Program Marks by its
registered third parties comply with the specifications in Chapter 10 and
14 of the Visa U.S.A. Operating Regulations.
To
avoid the penalties all ISO employees must either be (i) W2 employees of
the registered ISO or (ii) Visa registered 1099 employees (i.e.,
Independent Contractors) of the registered ISO or Visa Member. Any
Independent Sales Organization that solicits Merchants must be registered.
ISOs can only accept Merchant applications from their W2 employees or Visa
registered 1099 employees.
Sub-contracting
is not permitted. In reference to registered third parties, subcontracting
is considered to have occurred in any of the of the following situations:
1.
A 1099 employee of a Visa registered ISO who is (i) not registered as an
Independent Contractor in the Agent Registration Program and (ii)
soliciting Merchants on behalf of a Visa Member and/or its registered ISO.
2.
An organization that (i) is not registered as an Independent Sales
Organization in the Agent Registration Program, (ii) soliciting Merchants
to process credit card transactions, and (iii) submits Merchant
applications through a registered ISO for processing.
3.
A 1099 or W2 employee of a registered ISO which submits applications
through a different registered ISO to facilitate acceptance of hard to
place Merchants.
4.
To avoid the penalties all ISO employees must either be (i) W2 employees
of the registered ISO or (ii) Visa registered 1099 employees (i.e.,
Independent Contractors) of the registered ISO or Visa Member. Any
Independent Sales Organization that solicits Merchants must be registered.
ISOs can only accept Merchant applications from their W2 employees or Visa
registered 1099 employees.
5.
The Visa Agent Registration Program is administered by the Franchise
Management Department. Questions regarding the program can be directed to
Visa U.S.A., Franchise Management Department at (650) 432-2933, or fax
(650)432-1198.
MasterCard
Regulations
MasterCard
defines an MSP, or Member Service Provider, as Any non member of
MasterCard that provides ISO services to a MasterCard member and that is
registered with MasterCard as an MSP to provide such services. An ISO is
defined as Any MSP that provides program services, other than transaction
and cardholder processing, to a MasterCard member in furtherance of the
members program. An example would be an entity that provides merchant
solicitation or customer service.
MasterCard
Registration
The
MasterCard rules stated below have been in effect since 1997.
1.
ISOs must be individually registered with MasterCard by each member using
the ISO/MSPs services.
2.
TPPs must register directly with MasterCard.
3.
Upon registration, the member and the MSP will be notified by MasterCard;
Members will be charged $5,000 to register each ISO relationship and
$1,500 each year thereafter to maintain each ISOs MSP registration status.
An MSP can provide services to more than one member however, they will
need to be registered with each member and registration fees and renewal
fees will be collected for each relationship.
MasterCard
Obligations
MasterCard
holds their members responsible for their programs and their ISOs/MSPs.
Therefore, a member must approve and be responsible for all aspects of the
acquiring program, including the MSPs printed materials. The member must
approve an MSPs program materials before use and those materials may not
state or imply that the MSP is acting outside the rules.
Members
must approve in advance any fees associated with the members program.
Furthermore, all merchant agreements must be executed by the member. If
the ISO is a party of the agreement, MasterCard must first review and
approve the agreement.
Discount
rates and similar fees must be collected by the member and not the MSP.
MSPs may not have access to any account for which funds are due to the
merchant from the member.
The
member must have access to all executed merchant agreements and inspection
reports. The member must also have access to up-to-date names and
addresses of merchants in its program.
Members
may not be limited by an MSP in its authority to terminate any merchants
program participation
Members
must:
-
Provide MSP with MasterCard rules regulations and policies prior to
registration.
-
Register MSPs before they receive services from them.
-
Promptly provide MSP with any change to rules regulations, or
policies.
-
Supply the MSP with a written agreement detailing the services
provided.
MSPs
must:
-
Promptly provide the name and phone number of its sponsor member if
requested by a cardholder or merchant
-
Use MasterCard markings in accordance with rules and on MSP
stationery. All program materials must be approved by the member ahead of
time. The MasterCard name and logos must be used in conjunction with the
members name. (For example, MSP is an authorized representative of ABC
Bank.) Marks may not be used as an implied endorsement of MSPs programs by
MasterCard.
-
For additional information about MasterCard regulations contact
David McDowell, Director, Third Party Management, MasterCard
International, (914) 249-5367 or David_McDowell@mastercard.com.
Please Note: The above article is authored for general informational and
educational purposes and is not to be construed as legal advice, nor
relied upon as legal advice. Individual facts, circumstances, and
applicable laws may vary.
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