Page 10 - GS170402

News

Wells Fargo probe understand the relationship between reserves and
chargebacks," she said. "They don't typically call their
exposes high processors with these questions, but look for a merchant
advocate that can help them identify risks, mitigate them
and keep their MIDs healthy."
merchant fees Open dialog, transparency

Srinivasan wants to see more transparency in merchant
n ongoing investigation of questionable sales services agreements and processing relationships.
practices at Wells Fargo & Co., which initially Following are her additional recommendations for an open,
exposed fraudulent activities in the consumer transparent dialog among payments industry stakeholders:
A banking division, raised additional questions • ISOs: ISOs and merchant level salespeople (MLSs)
about the company's merchant services division, Wells need to see the big picture from a merchant's per-
Fargo Merchant Services LLC. In an April 6, 2017, state- spective. Merchants are doing their best to run suc-
ment, consumer class action law firm Keller Rohrback LLP cessful, profitable businesses, and they want clear,
challenged the company's fee structures and retroactive transparent pricing with explanations. ISOs could
billing of non-qualified transactions in monthly merchant think of themselves as "partners" with merchants
statements. and take a long-term view of their relationships. This
would include educating merchants about basic rules
At issue is a practice called enhanced billback. Processors to keep merchants' MIDs alive and healthy. "ISOs can
using this method charge a flat fee for transactions in also partner with industry leaders that offer services
a monthly processing statement and then retroactively and consulting to mitigate payments risk," she said.
charge merchants for non-qualified transactions the "ISOs who have asked me to help their clients have
following month. "Enhanced billback is also known as seen the benefit of establishing trust during the ap-
enhanced reduced recovery, blended rate or mixed rate," plication process to set the stage for a long-term,
the attorneys stated. healthy relationship."

The attorneys said they became aware of the problem • Merchants: Srinivasan understands that most mer-
through negative online reviews that criticized the bank's chants are too busy running their businesses to fo-
non-qualified fee policies. For example, the website cus on understanding payments, merchant accounts
Cardfellow.com stated, "Wells Fargo Merchant Services is and regulations, but she said they need to review
responsible for some of the highest rates and fees we have their pricing and contract terms in detail, ask ques-
ever seen in the 10 years we've been helping businesses tions and perhaps even consult with an attorney be-
secure the most competitive credit card processing fore signing up for merchant services. "Do not give
company." in to sales pressure," she said. "Take the time to do

Industry values, best practices research, and know the common terms like reserves,
interchange fees, chargeback fees, gateway fees,
Recent allegations against Wells Fargo and other major monthly minimums, etc."
acquirers can be detrimental to the payments industry's
reputation, according to Srii Srinivasan, Chief Executive • MLSs: MLSs need to focus on long-term relation-
Officer at Chargeback Gurus, an Allen, Texas-based risk ships more than short-term commissions and quotas,
management and mitigation firm. Srinivasan has seen Srinivasan stated. "Research and learn everything
numerous examples of poor service and "gotcha" fees when about fees, payment rules and contract terms so that
negotiating fee structures and contract terms on behalf of you can educate your clients," she said. "Partner with
merchant clients. industry leaders that can help clients." Diligent and
educated MLSs who are honest and transparent in
"I myself have experienced it when I initially set up their dealings with merchants will establish an excel-
merchants for our business over a decade ago," she said. lent reputation and gain referrals, she added.
"It is difficult to nail down the exact fees and penalties in
lengthy contracts; plus the actual fees for a transaction Given that Keller Rohrback has led class action settlements
may depend on the type of card used and interchange fees, against JPMorgan Chase & Co., Mattel Inc., Crayola LLC,
among other factors." and Anthem Inc. financial analysts have stated that if the
law firm can substantiate allegations of inflated fees and
Srinivasan said most merchants do not understand how retroactive billbacks, this will likely lead to further actions,
processors evaluate merchant account risk levels, the including a possible class action suit against Wells Fargo
potential consequences of exceeding their chargeback and its payment card processing partner First Data Corp.
thresholds, or why processors may hold funds in reserve
after closing a merchant account. "Merchants do not

10