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chant losses under the ISO agreement. Processors often require the ISO to challenge a residual
payment within a limited time, such as 30 days. If report-
Another kind of merchant loss that a processor could ing to the ISO is incomplete or incorrect, the ISO might be
cause are losses from the processor applying the wrong unable to discover an underpayment in a timely manner
descriptor to cardholder statements—a descriptor that is or might never realize that they had been underpaid, al-
different from the one requested by the merchant or ISO lowing the deadline to come and go.
acting for the merchant.
For this reason, the ISO should advocate for an extension
In short, while the relationship between ISO and proces- of its delay to question residual payments until such time
sor is often imbalanced, this should not result in the ISO as it is in receipt of both the payment and complete and
being liable for every bad act that could possibly occur. accurate reporting relating to the payment.

5. Reporting An ISO agreement balances the obligation of the ISO to
Reporting concerning ISO residuals is never a simple mat- generate sales and that of the processor to pay residu-
ter. However, it is normal for an ISO to expect its processor als. The best balance in an ISO agreement is achieved by
to supply reporting in sufficient detail to allow the ISO taking into account the specific themes discussed above
to verify that it is being paid correctly. That detail would and negotiating the most suitable and mutually beneficial
ideally include the amount paid by each merchant on each clauses.
transaction, as well as all interchange and other pricing
items deducted from those fees collected. In publishing The Green Sheet, neither the author nor the publisher are
engaged in rendering legal, accounting, or other professional services.
Even the most well-protected ISO relies on its processor If legal advice or other expert assistance is required, the services of a
for information concerning residuals. That said, the more competent professional should be sought. For further information on
detail provided by the processor, the greater the ability of this article, please contact Adam Atlas, Attorney at Law email: atlas@
the ISO to verify that it has been paid correctly and de- adamatlas.com, Tel. 514-842-0886.
mand correction of underpayment.

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