Page 32 - GS140201
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Implications and This could be problematic if an ISO calls a fee a "statement
fee" in its merchant agreement, and its processor calls it a
rationale for new "maintenance fee." To avoid this type of mismatch, where
that fee is coded on the pricing grids is now much more
important.
best practices Another best practice is to ensure the merchant receives
a complete copy of the merchant agreement. Many
By Ken Musante acquirers reference their agreements through links on their
Eureka Payments LLC applications, and the agreements can be up to 50 pages.
Must these now be printed and handed to merchants?
ecently, the federal government has taken more The sheer weight of these documents could intimidate
interest in the payments industry. Specifically, merchants.
the Federal Trade Commission named three Fees under fire
R ISOs in actions because of the ISOs' activities or
those of their merchants. The FTC has been warning ISOs Perhaps the biggest impact of the newly published best
it will take action when acquirers' actions harm consumers; practices pertains to termination fees. I have little regard
the lawsuits illustrate the agency's commitment and follow for such fees, believing that any fee in excess of the hard
through. cost or risk to set up and establish the merchant relationship
is questionable. Merchant relationships should be earned
Either in response to the recent regulatory environment or daily, monthly, quarterly and continually. Nevertheless,
because of the blurring definition of "merchant," MasterCard expensive, onerous cancellation fees are commonplace.
Worldwide revised its standards, requiring acquirers to
more clearly disclose their fees and fee changes. These new MasterCard's best practices suggest merchants and sub-
standards apply to traditional merchant acquirers and to merchants be allowed to terminate contracts without
payment facilitators like Square Inc. and Stripe. penalty within 90 days of receiving notice of a fee increase
or introduction of a new fee. While
Better disclosures it is unclear if this practice holds
Beginning in June 2014, acquirers Many acquirers in the face of an increase from the
and payment facilitators must reference their card networks, if that is the case,
provide a separate fee disclosure it is the antithesis of how many
section of the application or agreements through links acquirers operate. Further, if a hard
agreement clearly detailing the on their applications, cost or risk is undertaken to sign
pricing and methodology by the merchant and a card network
which each fee is calculated. and the agreements can change is introduced, how must
Fees include, but are not limited the acquirer operate so as to not
to, any pass-through fee as well be up to 50 pages. Must lose its investment in signing the
as any fee discount, settlement these now be printed and merchant?
or third-party fee billed by the
acquirer. Fee changes require 30- handed to merchants? Another recommendation is that
days' advance notice to merchants merchants receive a breakdown
alerting them of any fee increase. on their statements of how their
Plus, this disclosure must be provided fees are calculated. I whole-heartedly
in a separate document, not on the merchant statement. support this and am frustrated when I view statements in
Acquirers must manage their full-service ISOs and sub- which merchants are given only their volume and fee and
merchants accordingly. not presented with the information they need to calculate
their fees. No one would stand for this on a utility bill.
This makes sense; however, some changes from the card
networks do not provide time for acquirers to receive the It is unfortunate that MasterCard needed to publish
information, understand how the changes will interface these new standards and best practices. It tells us that
with their processing systems, and then properly convey either acquirers or payment facilitators are not properly
how those changes will impact merchant pricing. This conveying their fees and contractual terms. It also indicates
means acquirers may have to absorb an expense increase MasterCard believes our industry needs further guiding
for a period before being able to pass that fee along to principles to stave off increased government scrutiny. My
merchants. hope is that this action will help ensure merchants see
acquirers and ISOs as trusted advisers. Time will tell. I
MasterCard also outlines best practices that include remain hopeful.
truthful, clear and simple disclosures. This, too, seems
obvious; however, certain practices may make conforming Ken Musante is President of Eureka Payments LLC. Contact him by phone
difficult. For example, one best practice is that the at 707-476-0573 or by email at kenm@eurekapayments.com. For more
agreement and merchant statement use the same terms. information, visit www.eurekapayments.com.
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Implications and This could be problematic if an ISO calls a fee a "statement
fee" in its merchant agreement, and its processor calls it a
rationale for new "maintenance fee." To avoid this type of mismatch, where
that fee is coded on the pricing grids is now much more
important.
best practices Another best practice is to ensure the merchant receives
a complete copy of the merchant agreement. Many
By Ken Musante acquirers reference their agreements through links on their
Eureka Payments LLC applications, and the agreements can be up to 50 pages.
Must these now be printed and handed to merchants?
ecently, the federal government has taken more The sheer weight of these documents could intimidate
interest in the payments industry. Specifically, merchants.
the Federal Trade Commission named three Fees under fire
R ISOs in actions because of the ISOs' activities or
those of their merchants. The FTC has been warning ISOs Perhaps the biggest impact of the newly published best
it will take action when acquirers' actions harm consumers; practices pertains to termination fees. I have little regard
the lawsuits illustrate the agency's commitment and follow for such fees, believing that any fee in excess of the hard
through. cost or risk to set up and establish the merchant relationship
is questionable. Merchant relationships should be earned
Either in response to the recent regulatory environment or daily, monthly, quarterly and continually. Nevertheless,
because of the blurring definition of "merchant," MasterCard expensive, onerous cancellation fees are commonplace.
Worldwide revised its standards, requiring acquirers to
more clearly disclose their fees and fee changes. These new MasterCard's best practices suggest merchants and sub-
standards apply to traditional merchant acquirers and to merchants be allowed to terminate contracts without
payment facilitators like Square Inc. and Stripe. penalty within 90 days of receiving notice of a fee increase
or introduction of a new fee. While
Better disclosures it is unclear if this practice holds
Beginning in June 2014, acquirers Many acquirers in the face of an increase from the
and payment facilitators must reference their card networks, if that is the case,
provide a separate fee disclosure it is the antithesis of how many
section of the application or agreements through links acquirers operate. Further, if a hard
agreement clearly detailing the on their applications, cost or risk is undertaken to sign
pricing and methodology by the merchant and a card network
which each fee is calculated. and the agreements can change is introduced, how must
Fees include, but are not limited the acquirer operate so as to not
to, any pass-through fee as well be up to 50 pages. Must lose its investment in signing the
as any fee discount, settlement these now be printed and merchant?
or third-party fee billed by the
acquirer. Fee changes require 30- handed to merchants? Another recommendation is that
days' advance notice to merchants merchants receive a breakdown
alerting them of any fee increase. on their statements of how their
Plus, this disclosure must be provided fees are calculated. I whole-heartedly
in a separate document, not on the merchant statement. support this and am frustrated when I view statements in
Acquirers must manage their full-service ISOs and sub- which merchants are given only their volume and fee and
merchants accordingly. not presented with the information they need to calculate
their fees. No one would stand for this on a utility bill.
This makes sense; however, some changes from the card
networks do not provide time for acquirers to receive the It is unfortunate that MasterCard needed to publish
information, understand how the changes will interface these new standards and best practices. It tells us that
with their processing systems, and then properly convey either acquirers or payment facilitators are not properly
how those changes will impact merchant pricing. This conveying their fees and contractual terms. It also indicates
means acquirers may have to absorb an expense increase MasterCard believes our industry needs further guiding
for a period before being able to pass that fee along to principles to stave off increased government scrutiny. My
merchants. hope is that this action will help ensure merchants see
acquirers and ISOs as trusted advisers. Time will tell. I
MasterCard also outlines best practices that include remain hopeful.
truthful, clear and simple disclosures. This, too, seems
obvious; however, certain practices may make conforming Ken Musante is President of Eureka Payments LLC. Contact him by phone
difficult. For example, one best practice is that the at 707-476-0573 or by email at kenm@eurekapayments.com. For more
agreement and merchant statement use the same terms. information, visit www.eurekapayments.com.
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