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Clean Up Your Agent Agreements or Else!

By Adam Atlas

ISOs are only as good as their sales agent agreements. Believe it or not, some ISOs carry liability but have not taken the time to carefully draft and administer their agent agreements to ensure that the agents working for them take responsibility for any harm that they might cause.

It's always difficult to throw the book at agents because they are the people who put bread and butter on the plates of everyone in this industry.

I understand that approximately 80% of all new merchant accounts are signed thanks to thousands of independent agents pounding the pavement and manning the phones.

Without ignoring the fundamentally important work done by agents, following is a "must-do" list for ISOs concerning their agreements with sales agents:


Even if the card Association rules did not require it (which they do), ISOs should never do business with agents without written agreements.

Written agreements help to avoid disputes when people forget the details of the deals that they made. In addition, written agreements help to remind the parties of the important obligations that are incumbent on all participants in this industry.

This might sound painfully obvious, but ISOs should have agents actually sign their agreements. (Many ISOs don't.) Then, they should file the agreements in a safe place. ISOs working with a large number of agents should consider scanning copies of the agreements in order to keep them in electronic as well as paper format.


Agents are no less bound by the partially secret card Association rules. If agents tell ISOs that it makes no sense to be bound by rules to which they have no access, ISOs should direct them to the card Associations, which do not share their rules with those subject to them.

Trade Name

I actually have not read the rules on this topic because, for no reason known to me, they are partially secret. However, having negotiated a hundred or so ISO agreements, my general understanding is that agents, just like the ISOs with whom they work, cannot use their own business name when promoting the services of a bank.

For example, let's say I owned Adam's Bank, and I signed ISOs to promote my acquiring services and, in turn, they signed agents to do more of the same. All of my ISOs and agents would have to knock on doors and make calls saying: "Hello, I am an agent for the merchant services of Adam's Bank."

The agents cannot say: "Hello, I'm Acme Merchant Services." They have to refer directly to the bank for which they are agents.

I must digress here for a moment to say that most ISOs and agents are confused about what to do if they sell for more than one bank.

Of course, the best place to find an answer to this question is the banks themselves. The card Association rules might also hold the answer, if the banks will explain them to you.

I have received correspondence from a major national bank asking me to help make the Visa U.S.A. rules public. I am doing all I can by repeating here that the secrecy of the rules is not only illogical, but ultimately short-sighted.


Many agents take no liability at all. Even those agents without liability should be liable for a Visa fine, for example, if they are the party responsible for the fine. In other words, a no-liability deal for agents should not mean that they would never incur liability.

Instead it should mean that they should not be liable if they stay within the parameters of the agent agreement and the rules.

For example, agents should assume liability for violating a non-competition clause. Generally, agents should never be less liable than the ISO itself, except as it relates to chargebacks and merchant fraud where liability is assumed with corresponding variances in pricing.


A non-competition clause is one that should prevent agents from using their position with one ISO, for the benefit of another ISO or another bank. I've heard countless horror stories of merchants "porting" or moving merchants from one bank to another in flagrant violation of non-competition clauses.

The problem for ISOs, however, is that this moving of merchants often causes more harm than simply the loss of those merchants; it usually means the loss of all their residuals.

Processors and banks occasionally assume that ISOs are complicit in their rogue agent activity. As such, ISOs should always keep track of exactly who submits what merchants to whom on what date. Dates of faxed applications might one day save an ISO's business.


A non-solicitation clause prevents agents from taking an ISO's other agents, employees or merchants. Rogue agents might take more than only merchants; they might take agents as well. A well-drafted agent agreement should prevent this.


In addition to the strict control of the use of ISO and bank names, the card Associations have very strict rules concerning the use of their names and logos. ISOs should not only make agents aware of these rules, but also make them contractually bound to observe them.

For example, no agents should promote that they represent MasterCard International, unless they are really agents of MasterCard (as distinct from a member bank of MasterCard). The Associations guard their logos as carefully as their names.


ISOs and agents both know when their relationship begins; however, both parties don't always know when the relationship ends. ISOs should make sure agent agreements detail when the moment of termination occurs, perhaps by a written notice from one party to the other.

It's critical for ISOs to know when agents are no longer their agents because at this point, ISOs are no longer liable for agent rule violations.

In my experience, agents are responsible for both the greatest successes and the greatest failures in our business. In order to make the most of the former and diminish the latter, ISOs must pay close attention to agent agreements.

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, e-mail Adam Atlas at or call him at 514-842-0886.

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