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Education

Snooze and you lose In any case, merchants and merchant level salespeople should do business
only with reputable processors and make sure they know the names of the
Businesses processing offshore individuals running the processor, as well as the identity of the acquirer
sometimes encounter administra- handling the account. Finally, as always, a merchant must carefully review and
tive delays. Merchants often receive make sure to understand the complete terms and conditions before entering
chargeback reports in an untimely or any merchant agreement.
inconsistent manner, which can pre-
vent them from contesting charge- The information contained in this article is for educational purposes only. Please consult an attor-
backs. ney before relying upon it for your specific legal needs. Theodore F. Monroe is an Attorney whose
practice focuses on the electronic payment and direct marketing industries. For more informa-
Such shoddy reporting practices can tion about this article or any other matter, e-mail him at monroe@tfmlaw.com or call him at
cripple a merchant's implementation 213-233-2273.
of chargeback reduction measures,
possibly resulting in a merchant's
termination and placement on
MATCH. In addition, while domestic
processors generally offer merchants
real-time online viewing and report-
ing, offshore processors often cannot
do so. This makes it more difficult
to monitor transactions and thereby
sets the stage for belated discovery of
problems.

Merchant agreements for offshore
processing also frequently contain
choice of law and venue provisions.
These provisions dictate which
country's laws will govern disputes
pertaining to the contract and spec-
ify the country and court where dis-
putes must be resolved.

A U.S. merchant entering an agree-
ment containing such provisions
may be prohibited from turning to
U.S. courts for relief. Thus, it may be
extremely difficult to enforce rights
because of provisions that force the
merchant to locate and retain coun-
sel in the appropriate jurisdiction
familiar with the applicable law. Ob-
viously, the difficulties of trying to
sue and collect from entities based in
such places as Cyprus, Lebanon and
Gibraltar are legion. Even initiating
litigation can prove to be so costly
and time-consuming that many mer-
chants merely walk away.

Don't throw caution to the wind
Merchants need to approach offshore
processing with wary eyes: in truth,
it is best suited only for merchants
who cannot get a domestic account,
or for strong-stomached, calculating
merchants who want to exploit card
brand rules and live at the charge-
back precipice.

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