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Education

2. Election to not renew

An ISO or processor is typically entitled to not renew an
ISO agreement at the end of the current term. However,
this right is usually open for exercise only by sending
notice within a specified, amount of time before the end
Legal ease: of the current term ‒ 90 days, for example. In most cases,
you can't rightfully terminate at the end of a given initial
or renewal term unless you have provided the necessary
prior notice.

Some processors can be quite technical on this point. I saw
a major processor force an ISO to renew an existing ISO
Navigating ISO agreement, because the ISO delivered the notice of election
not to renew a few hours after the deadline. The 90-day
agreement notice period had expired, and that was final. If you want
to terminate an agreement by not renewing, prepare well
in advance, and do not send the notice late.
termination 3. Termination for default

By Adam Atlas A number of circumstances can lead an ISO to believe it
has the right to terminate due to default by a processor.
Attorney at Law The most common reasons for this are that the processor
stops paying the ISO entirely or fails to pay amounts the
hinking about divorce on your wedding day ISO believes are owed.
– now that's a lawyer for you! Unlike prenups
that are signed only by couples who both want Regardless of the reason for termination for cause, the
T one, termination clauses are now built into party alleging default should gather evidence that proves
nearly every ISO agreement. Kidding aside, the termi- default by the other party. Merely suspecting default
nation language in an ISO agreement is critical. Along would not stand up in court without proof of the alleged
with other important clauses set forth in the agreement, wrongdoing.
it requires careful review before the document is signed.
Termination for default, like most legal notices under
This article highlights six key aspects of ISO agreement contract, is best considered with the advice of legal counsel.
termination. I hope you find it informative whether you When a party is terminating for default, there may be need
are in negotiations or already working under an ISO for prompt and aggressive action – such as an injunction
agreement. to order that payments resume, confidential information
be protected or some other recourse be initiated. These
1. Term actions should be planned as far ahead as possible.

Before discussing termination, you have to establish a 4. Form of notice
term – which appears in virtually every ISO agreement.
Such agreements typically have an initial term between Most ISO agreements provide for notice to be sent in
three and five years. The initial term is usually followed a specific manner (for example, FedEx delivered to a
automatically by renewal terms of one or two years. given address or email sent to a specific email address).
In most cases, if neither party elects to not renew, the When a notice of non-renewal, termination or default is
agreement will automatically renew from the initial term sent by other means than the prescribed methods, some
into a renewal term, and then into successive renewal counterparties will allege that the notice is invalid – and
terms thereafter. treat it like it was never sent.

The purpose of a term is to allow both parties to plan ahead. Before sending any notice, review the notice provisions in
The processor relies on the term in an ISO agreement to the agreement to be sure you send it as set forth. Some
ensure that it will be receiving referrals – and perhaps a ISO agreements will require that each notice by the ISO
minimum fee commitment – from the ISO. The ISO relies also be sent to the acquiring bank. When you wish to
on the term in said agreement so it can plan on referring exercise rights under your ISO agreement, stack the deck
merchants to the processor for a predictable period of time in your favor by sending notices in accordance with the
and on predictable business terms – such as advantageous agreement's terms.
buy-rates.

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