By Adam Atlas
Attorney at Law
I was having lunch with a promising millennial New York ISO the other day, and he was explaining how he wanted to get more merchants outside of New York. I suggested that he choose a good-quality, trusted agent and send that person to another city like Los Angeles or Miami to seed a new office.
The ISO looked at me and said, "Why do I need someone in Miami to get merchants in Miami?" This was an aha moment for me in understanding the reality of millennial ISOs and probably a large cohort of other ISOs.
The ISO could not conceive of the need for a physical presence in a given city to drum up business in that city. This spurred me to consider putting together a set of legal considerations to support the millennial view on payments ‒ if there is such a thing.
For the record, I love millennials. I find their view of the world refreshing and delightfully free of the assumptions of earlier generations about sales, virtual interaction versus real interaction, and outdated cultural references, like to Archie Bunker, for example.
I think the whole industry should learn from millennials. After all, merchants are increasingly of that generation, and our industry should therefore be geared toward selling to them. To help foster that learning, this article discusses legal aspects of supporting the millennial view on payments.
It's terribly passé to say, "How about a paperless contracting system?" The default for millennial contracting is electronic. Paper, and the not-to-be-named fax machine are all relics of a bygone era. My view is that paperless contracting, when done right, is superior to old-fashioned paper contracts for a number of reasons.
First, electronic records are easier to keep and distribute. When a merchant agreement is signed on a tablet or computer, the ISO is able to share the signed agreement with its underwriting department, sales colleagues and acquirer quickly. The onboarding process is rendered more efficient.
Assuming the agreement is complete and that the merchant has actually had a chance to review the terms prior to signing, the electronic record of the agreement serves as an excellent piece of evidence in support of the existence of the contract.
The U.S. e-sign law (15 U.S. Code Chapter 96) states that a contract will be no less valid or enforceable because it is formed by electronic means. ISOs should be careful, however, to make sure that, before accepting the agreement, the merchant actually gets a chance to review and accept the whole merchant agreement, not just the pricing or application page.
Some ISOs assume, incorrectly, that a merchant can be bound by detailed terms and conditions that the merchant has not had a chance to review prior to signing. This assumption has put in jeopardy the validity of merchant agreements and all the terms of those agreements that are vital for ISO revenue and limitation of liability.
While embracing the convenience of electronic contract formation, ISOs should also be rigorous in giving merchants the opportunity to review the whole of the agreements they are being asked to sign.
Millennials are more at ease with blending their personal and professional online profiles. This is not something I like to do, but for those who like it, it's important to be aware of the impact that personal content can have on professional marketing. For example, an ISO owner who posts pictures from a pub crawl on the same Facebook account that he or she uses to recruit merchants might put off some target merchants.
Another legal aspect of marketing on social networks is to remember that the payment network (Visa Inc., MasterCard Worldwide, Discover Financial Services, American Express Co., etc.) rules still apply. An ISO that posts "Best Visa rates here" on Twitter should also include disclosure about the company's Visa and MasterCard registration status, as well as comply with all other payment network rules.
The trail of promises that an ISO makes on social networks can come back to haunt the ISO in the event that merchants believe they did not get what they were promised. As with all marketing, social network marketing should be honest and true to the products, services, terms and pricing actually offered by the ISO.
The beauty of the contemporary economy is that an ISO can have a national presence from a single office. Virtual national presence is as easy as a website and a toll-free phone number.
I would, however, recommend against misleading potential merchants about the size, location and true nature of your business. From a legal perspective, the ISO is exposed to claims of misleading advertising if it misinforms merchants about the nature of its business. From a practical perspective, merchants, large or small, will appreciate honesty.
Other than in the home state of the ISO, I have never seen state law oblige an ISO to register for the purposes of carrying on business. That said, ISOs should still be mindful of potential requirements in one state or another when marketing to that state from their home state. This is perhaps most relevant in the setting of convenience fees and surcharges for credit and debit card transactions; many states have laws regulating some of those fees.
In the old days, before millennials were born, there was a kind of admiration for formal language and a certain aspiration on the part of business people to use rather more formal language in contracts. In a change for the better, the preference of millennials is for language that is cool and simple.
I am very much in favor of simplified language in contract drafting. Contracts should be understandable. From the point of view of lawyers, however, it's actually harder to draft a contract in simple language than legalease. Millennials are challenging lawyers to use language that is easier to understand. This is not because they are less intelligent; it is because they believe in greater transparency and accessibility ‒ both great attributes of legal drafting.
I am grateful to millennials for leading us into a paperless, virtual and simple form of contract drafting. 
In publishing The Green Sheet, neither the author nor the publisher is engaged in rendering legal, accounting or other professional services. If you require legal advice or other expert assistance, seek the services of a competent professional. For further information on this article, email Adam Atlas, Attorney at Law, at atlas@adamatlas.com or call him at 514-842-0886.
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