Page 36 - GS190802

Education

but the leases didn't run for their full terms, as you can
imagine. The legal lesson here, of course, is to check that
your merchants are alive before sending them equipment.

ISO bankrupt by orthopedic beds
Future delivery is the bogeyman of any liability ISO.
Future delivery is when a merchant takes a payment today
Legal ease: for goods or services to be delivered on a future date.
Travel, furniture and home improvement are all examples
of future-delivery offerings. In this case, a merchant was
in the business of selling rather expensive orthopedic beds
– the kind where you can raise or lower the back or the
feet.

Anyway, the account was preforming swimmingly, and
generating good fee revenue for the ISO for a while. Then,
the merchant put through a large number of transactions.
Fraud stories: After the liability ISO settled the funds to the merchant,
the merchant disappeared and never delivered the beds.
Bottom of the The unhappy customers rightfully charged back all their
transactions. The chargeback liability for which the ISO
legal barrel was 100 percent liable far exceeded the assets of the ISO
and what its residuals could ever pay. The ISO was put
out of business as a result. The legal lesson here is to not
By Adam Atlas assume risk that exceeds your ability to manage.
Attorney at Law Merchant settlements go to the wrong account
Here, a merchant calls an ISO to let it know that for two
id you hear the story about an ISO bankrupted years all its settlements were going to an account the
by orthopedic beds? Please read-on to get the merchant did not own. Let me repeat: the merchant was
gory details. As a commercial contract and processing (at one location) for two years and (alleges) the
D compliance attorney advising ISOs and other business did not receive any of the money for the merchant
crypto and payments companies, I sometimes tell clients account.
that I am a "good times" lawyer. This is in contrast to
trial or litigation lawyers who have to deal with disputes At the start of this mysterious two year period, a notice
between parties when our carefully drafted contracts are was sent to the ISO or its processor, directing them to
fought over. settle merchant funds to a new account. At the end of
the two-year period, the issue became who actually sent
In 15 years of advising ISOs and their merchants, I have, the notice to change the deposit account and whether the
however, seen some low moments, and I think some of these person sending the notice was authorized to do so by the Please Join Us at America’s Only ATM Industry Expo 100% Dedicated
horror stories can serve to educate ISOs on how to make "real" merchant.
their businesses stronger from a legal perspective. Names to the Independent/Retail ATM Marketplace.
and some details have been removed or fictionalized to The legal lesson here is to pay particular attention to bank
protect the identities of the persons concerned. Celebrating 50 Years of ATMs in America
account information, and perhaps make an additional
Leases with the dead effort to verify bank account information by telephone
rather than simply relying on a form submitted by a NAC2019 Attendee Registration includes Access to All:
A client of ours that is a POS equipment leasing company merchant. Note that if the merchant is dishonest, it may be • Pre-Conference Workshops
found out that an agent was signing leases for people who possible to defraud an ISO by sending a notice to change • Educational Seminars throughout the Event
were no longer alive. Given that lease commissions are the deposit account on a merchant account and then • Networking Receptions & 50th Anniversary Celebrations
paid on signing, or a month afterwards, and not over many renouncing that notice later on. • Expo Hall
years like payment processing residuals, the temptation • Networking Meals
for this agent to forge signatures of the deceased was When merchants are defrauded (by people who order
simply too great. goods then deny having ordered them), it's called friendly • New Products & Services - Flash Presentations
fraud. Be mindful that friendly fraud by a merchant is as • Special Keynote Speakers
I do not recall whether the leasing company recovered a much of an possibility as friendly fraud perpetrated by • And More...
the lease commissions paid to the unscrupulous agent, consumers.
Attendee Registration: https://www.natmc.org/nac2019-attendee-registration.html

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