Page 36 - GS191101

Education

Let's imagine the merchant gives the MLS an ultimatum:
either find me another processing home, or I'll go
elsewhere. This would be to the loss of both ISO and agent.
Imagine the MLS makes a final attempt to inspire the ISO
to serve the merchant properly, to no avail. The agent then
takes the merchant elsewhere – in technical violation of
the merchant agreement.

Legal ease: Imagine the ISO takes the same action against this agent
as it did against the MLS in the earlier example, in which
the agent, in bad faith, moved a substantial quantity of
merchants in blatant violation of their agreement – with
no excuses. In the second case, the ISO may, technically, be
able to get away with claiming damages against the good
faith, well-meaning agent, but remember, the merchant is
gone, and this is a collection mission that is unlikely to
generate any real benefit for the ISO.
Legal strategies of What's more, other agents observing the ISO's aggressive

stance will be put off and less motivated to board new
successful ISOs merchants or work with the ISO to solve issues pertaining
to merchants needing better service. In short, this
By Adam Atlas aggressive position by the ISO may do more harm to its
business than one that is more flexible and understanding
Attorney at Law of the merchant's real needs.

aving had the privilege of advising ISOs over Then, there are the cases of extreme aggression. Here, an
a number of years, I've been able to observe ISO pursues an MLS who has committed a minor technical
strategies taken by ISOs facing various legal infraction and has no assets. The aggressive ISO often
H issues. New clients sometimes ask how my cites this type of wasteful claim as being necessary to
best clients have achieved their aims. In this article, I will prove a point or make an example of the agent. More often
focus on a few legal strategies adopted by some of my than not, this kind of aggression injects fear into the ISO's
firm's most successful clients. relationships with other MLSs – fear that could poison the
long-term mutual trust required to build the best business
1. Aggressive versus passive in legal claims relationships.
Here, the winners find a perfect balance between
aggressive and passive actions. When, objectively, an Note that very aggressive ISOs spend a significant amount
ISO has been wronged, such as an agent's unambiguous, of money on lawyers, so I suppose there could be a silver
wrongful and substantial solicitation of its merchants, and lining for me in cases involving aggressive ISOs (just
the ISO is likely to recover something from the agent, then kidding). On a serious note, my team does not support any
winning ISOs have taken aggressive positions. party in futile or excessively aggressive claims, as we do
not believe that to be a good use of client money or the
Being aggressive in this context means reviewing the time of our lawyers.
terms of the applicable agent agreement and enforcing 2. W-2 employees versus 1
them. Such enforcement starts with sending a cease and 099 independent contractors
desist notice, perhaps clawing back payment of residuals,
and can rise to taking action before a court or arbitrator to As readers will know, the two most common ways to
recover losses caused by the agent. engage agents are as employees (for which a W-2 tax form
is filed) or as independent contractors (for which a 1099
But what about ISOs that are too aggressive? An example form is filed). Key differences exist between these two
would be when a merchant level salesperson (MLS) has types of relationships.
a merchant who was entirely displeased with the ISO's
service, the services of the ISO are not compatible with the In short, employees are obligated to follow ISO instructions
needs of the merchant, the merchant has complained to the that set the parameters of their work tasks, productivity,
ISO about the situation, and the agent has also advocated schedule, etc., and are entitled to employer and government
for better service for the merchant from the ISO – but the benefits, such as minimum wage, that go along with being
ISO has not delivered. an employee. Independent contractors do not enjoy the

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