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Understanding Visa Direct Marketing MCC's
By David H. Press

High-Risk Telemarketing Merchants must register with Visa before beginning to process, and this registration includes the payment of a $500 processing fee. An annual fee of $250 is collected each September 1, following the registration date. Before accepting transactions from a High-Risk Telemarketing Merchant, an acquirer must submit to Visa USA a completed Visa USA High-Risk Merchant Registration and Certification.

Extra scrutiny should be made on these merchants. The card associations are leery of processing for them, and there is a greater danger of being fined. Visa regulations require registration for the following types of merchants:

  • Direct Marketing Travel-Related Arrangement Services (MCC 5962)
  • Inbound Teleservices (MCC 5967)
  • Outbound Telemarketing (MCC 5966)

Every ISO should make sure it is using the current Visa MCC list to establish the MCC for each merchant. The Visa fine for failure to identify a High-Risk Telemarketing Merchant with the correct MCC is $25,000 per merchant per month. After the third violation in one calendar year, the fine is $100,000 and/or prohibition against signing High-Risk Telemarketing Merchants and the possible termination of the acquirer program.

The following are all of the Visa Direct Marketing Merchant Category Codes (MCC):

Direct Marketing Insurance Services (5960)

Description: Insurance services that may be offered via direct mail, billing statement insert, magazine or television advertisement. Prospective customers are given a telephone number or an address to which they can reply for enrollment in the service. Services offered include all forms of life insurance, hospital indemnity insurance, accidental death and dismemberment insurance or credit card insurance. Billing of insurance premiums is in the form of periodic (monthly, quarterly, annually) installments that continue until canceled by either the cardholder or the insurance company. Insurance agents are specifically excluded from this MCC.

Example: an insurance company that solicits cardholders for credit card insurance via billing statement insert.

Travel-Related Arrangement Services (5962)

Description: The merchant initiates contact with cardholders via telephone calls, magazine or television ads or through mailings (other than a catalog) to generate sales or to offer potential customers an incentive to call the merchant. The merchant's direct contact methods are similar to the Outbound Telemarketing Merchant, but only travel related arrangements are sold.

Example: discount travel clubs.

Catalog Merchants (5964)

Description: Goods are offered to consumers via a paper or electronic catalog. This category code is designed for merchants with no retail ("face-to-face") sales. Note: A one- or two-page leaflet is not considered a catalog.

Example: television shopping services, catalog services.

Combination Catalog and Retail Merchants (5965)

Description: Goods are sold to consumers via a paper or electronic catalog and at one or more retail outlets. Catalog sales must be processed under Merchant Category Code 5965, and all retail sales must be processed under the appropriate retail Merchant Category Code, for which a separate and unique merchant name and merchant identification number are required.

Examples: department stores with catalog subsidiaries or divisions; electronics, sports clothes/equipment, or gourmet food/equipment sold by catalog and in retail stores.

Outbound Telemarketing Merchants (5966)

Description: The merchant initiates contact with cardholders (for both products and services) via telephone calls or through mailings (other than a catalog), instructing the cardholder to call the merchant. This classification includes merchants known as "upsellers." These merchants solicit cardholders to make additional purchases when they contact call centers to purchase products of other Direct Marketing Merchants.

Examples: distributors of cosmetics, health care products, vitamins, time-share facilities.

Inbound Teleservices Merchants (5967)

Description: Audiotext or videotext services accessed by the cardholder via fax or telephone. This Merchant Category Code applies to information services as well as products that may be sold through the service.

Examples: horoscope readings, pay-per-call services, sports scores, stock market quotations.

Continuity/Subscription Merchants (5968)

Description: Products or services are offered via subscription to a cardholder on a continuing (monthly, quarterly) basis.

Examples: record, tape or compact disc clubs; collectible services; periodicals.

Other Direct Marketers (5969)

Description: This category code is comprised of all other direct marketing companies that do not meet the criteria for any of the above categories. It includes merchants offering one or two products per promotion, using multiple approaches (including a one-or two-page leaflet with an order form or telephone number for placing orders).

Examples: theater or sports tickets by mail/phone order, specialty items (such as kitchen tools/appliances, exercise equipment) offered only through radio or television.

A merchant assigned to MCCs 5962, 5966, 5967, above, and 7995 (betting, including lottery tickets, casino gaming chips, off-track betting and wagers at race tracks) is monitored under the Visa High-Risk Chargeback Monitoring Program.

In this program, Visa monitors the total volume of U.S. domestic and international interchange and chargebacks for merchants and identifies merchants that experience all of the following activity levels during any month:

  • 50 interchange transactions.
  • 50 chargebacks.
  • A 2.5% ratio of overall chargeback-to-interchange volume or a 1% ratio of consumer dispute chargeback-to-interchange volume.

Visa assesses High-Risk Chargeback Monitoring Program acquirer penalties that begin at a $2,500 review fee and $100 fine per chargeback, and if monthly activity levels continue the fines increase and could lead to the eventual disqualification of the merchant from taking Visa.

When signing merchants with these MCCs, the ISO should make sure that the merchant has an understanding of the ISO's chargeback process and proactive controls are in place to minimize the number of chargebacks.

It has been our experience that most ISOs and processors do nothing more than send out the standard confusing "chargeback notices" to these merchants. Taking a little extra time with these merchants and getting them set up properly to prevent chargebacks allows the ISO to continue to process for these often very profitable customers.

* * *

In my initial article in this Green Sheet series, I wrote about the importance of using Verified by Visa as a result of the chargeback liability shift from acquirers to issuers for the fraudulent use of a card, effective April 5, 2003. Now Visa is offering an incentive for using Verified by Visa.

In its new interchange rates for credit cards effective August 1, 2003, Visa has established a price incentive to encourage e-commerce merchants to use Verified by Visa. Merchants that have Verified by Visa will still pay the current rate of 1.80% + 10 cents. Merchants not using Verified by Visa rates will increase to 1.85% + 10 cents.

This is an opportunity for ISOs to pass on the savings to merchants as an incentive to use Verified by Visa, or it could be used to create additional revenue for the ISO in offering Verified by Visa to its e-commerce merchants.

David H. Press is Principal and President of Integrity Bankcard Consultants, Inc. Phone him at 630-637-4010, e-mail dhp@integritybankcard.net or visit www.integritybankcard.net.

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