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Merchants that engage in illegal business practices have been the rchants that engage in illegal business practices have been the
cornerstone of the FTC's lawsuits against payment processing ornerstone of the FTC's lawsuits against payment processing
c
companies.
companies.
–
– Cliff Teston Cliff Teston
Signature Card Services
Signature Card Services

After mer
After merchants are approved and boarded, we are chants are approved and boarded, we are If necessary, we also coordinate with the merchant and/or If necessary, we also coordinate with the merchant and/or
p
proactive about keeping an open relationship with them roactive about keeping an open relationship with them sales partner during this process to gain an understanding sales partner during this process to gain an understanding
– scheduling calls to follow up about their service and to scheduling calls to follow up about their service and to of what their sales and marketing practices are, and of what their sales and marketing practices are, and
–
make sur to evaluate the risk associated with those processes. to evaluate the risk associated with those processes.
make sure the plan that merchant selected is working for e the plan that merchant selected is working for
t their business.heir business. This process, coupled with the strength and combined This process, coupled with the strength and combined
experience of our underwriting team, catches the vast experience of our underwriting team, catches the vast
By doing this, we are able to glean information about the y doing this, we are able to glean information about the
B majority of illegal operations.majority of illegal operations.
sales process from the merchant to make sure everything
sales process from the merchant to make sure everything
was aboveboar After a merchant has been approved, we, along with our After a merchant has been approved, we, along with our
was aboveboard. When, and if, any risk issues arise, we d. When, and if, any risk issues arise, we
communicate these issues clearly and early on, which banks, carefully monitor chargebacks. If a merchant is
communicate these issues clearly and early on, which
banks, carefully monitor chargebacks. If a merchant is
allows us to mitigate risk for all parties involved.
allows us to mitigate risk for all parties involved. engaging in an illegal activity, chargebacks are going to be
engaging in an illegal activity, chargebacks are going to be
high. Additionally, there are warning signs, such as spikes
high. Additionally, there are warning signs, such as spikes
Our process also establishes a strong relationship and in credits in a particular month, that our risk management
Our process also establishes a strong relationship and
in credits in a particular month, that our risk management
an open line of communication between us and our team would likely catch and investigate to determine if
an open line of communication between us and our
team would likely catch and investigate to determine if
merchants, and in the event something is not aboveboard, there is fraud.
merchants, and in the event something is not aboveboard,
there is fraud.
they are more likely to notify us.
they are more likely to notify us.
In the event that chargebacks are above average, we do
In the event that chargebacks are above average, we do
2. Merchants that engage in illegal business practices
additional investigation of those merchants to determine
2. Merchants that engage in illegal business practices additional investigation of those merchants to determine
have been the cornerstone of the FTC's lawsuits against where the chargebacks are coming from. From the data we
where the chargebacks are coming from. From the data we
have been the cornerstone of the FTC's lawsuits against
payment processing companies. The FTC has alleged that gather, we evaluate the likelihood of fraud, or illegal sales
payment processing companies. The FTC has alleged that
gather, we evaluate the likelihood of fraud, or illegal sales
or marketing activity.
those payment processing companies knew of the illegal
those payment processing companies knew of the illegal or marketing activity.
activities their merchants were engaged in, and suggested
activities their merchants were engaged in, and suggested
and offered services to aid in these illegal practices. To
and offered services to aid in these illegal practices. To 3. This scrutiny by the FTC is unlikely to lead to federal
3. This scrutiny by the FTC is unlikely to lead to federal
regulation of B2B contracts. The reason being that any
date, these cases have not been publicly resolved; they
date, these cases have not been publicly resolved; they regulation of B2B contracts. The reason being that any
have either been settled or are still ongoing. contract to perform an illegal act is already considered
have either been settled or are still ongoing.
contract to perform an illegal act is already considered
null and void under existing contract law. To the extent
null and void under existing contract law. To the extent
At Signature, we organize our review to ascertain the legality
At Signature, we organize our review to ascertain the legality that card processing companies contracted with merchants
that card processing companies contracted with merchants
to support and engage in illegal activity, those contracts
of sales and marketing practices on both the front end and
of sales and marketing practices on both the front end and to support and engage in illegal activity, those contracts
would not hold up in court.
the back end. On the front end, we are lucky to have a stellar would not hold up in court.
the back end. On the front end, we are lucky to have a stellar
underwriting team. Each incoming merchant application
underwriting team. Each incoming merchant application
goes through three levels of review and approval. If the card processing companies did not enter into a
goes through three levels of review and approval.
If the card processing companies did not enter into a
contract, any regulation of contracts would not have made
contract, any regulation of contracts would not have made
a difference. Lastly, there is too much at stake in contract
First, each merchant is reviewed in great detail by the
First, each merchant is reviewed in great detail by the a difference. Lastly, there is too much at stake in contract
law to allow these types of regulations to be put in place;
junior underwriting analyst. This includes everything law to allow these types of regulations to be put in place;
junior underwriting analyst. This includes everything
from obtaining and reviewing the relevant information at the burden placed on companies and on our court systems
from obtaining and reviewing the relevant information at
the burden placed on companies and on our court systems
would be enormous.
the corporate level, to carefully looking at their sales and
the corporate level, to carefully looking at their sales and would be enormous.
marketing practices and engaging in mock transactions
marketing practices and engaging in mock transactions
through their website. Even if additional federal regulation of B2B contracts is
through their website.
Even if additional federal regulation of B2B contracts is
implemented, such regulation is unlikely to affect our
implemented, such regulation is unlikely to affect our
industry. If a merchant could renege on a signed contract
After the junior underwriting analyst has signed off,
After the junior underwriting analyst has signed off, industry. If a merchant could renege on a signed contract
for three days, and this right could not be waived, every
a senior underwriting analyst reviews the application
a senior underwriting analyst reviews the application for three days, and this right could not be waived, every
single company would just contractually provide for
material, checks on any notes or issues highlighted by the
material, checks on any notes or issues highlighted by the single company would just contractually provide for
effective dates and performance dates beginning just after
junior analyst, and signs off.
junior analyst, and signs off. effective dates and performance dates beginning just after
three days have elapsed. If anything, any such regulation
three days have elapsed. If anything, any such regulation
The application is then submitted to our underwriting
The application is then submitted to our underwriting would only serve to delay the time it takes to have someone
would only serve to delay the time it takes to have someone
up and running by three days.
manager for sign-off. Since we handle everything internally up and running by three days.
manager for sign-off. Since we handle everything internally
and have automated a lot of these processes through our
and have automated a lot of these processes through our
own internal underwriting department and risk portal, we
own internal underwriting department and risk portal, we
are able to effectively, yet quickly, evaluate the practices of
are able to effectively, yet quickly, evaluate the practices of
each merchant.
each merchant.
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