n my experience as an attorney, I think that sometimes the most valuable service you can provide is sharing your observations. This type of communication is very effective because it goes far beyond simply reciting legal rules and principles in a sterile vacuum.

Instead, sharing observations allows you to convey practical, "real world" information. This promotes cause and effect understanding of the occurrences that seem to elude corrective efforts. In this article, I refer to unnecessary loss of merchant accounts.

Merchant account termination and loss are avoidable. Yet these revenue-diminishing events continue to occur with alarming frequency. Could it be that needless merchant account loss is just an acceptable part of any merchant portfolio? As an acquirer, ISO or merchant level salesperson (MLS), do you expend enormous sales and marketing resources to form merchant agreements knowing that you will lose a significant number of signed merchants?

If the answer to the preceding questions is "yes," and you do not care about avoiding preventable loss, then you might not want to read this article. However, if keeping the merchants that you sign and enjoying the revenue stream that they provide interests you, please continue reading.

For more than 10 years, distressed merchants have contacted me. Almost invariably, they seek urgent solutions for acute problems with their merchant accounts. Among other things, merchants request assistance with terminated or MATCH-listed merchant accounts, chargeback problems and the withholding of reserves for extended (business-threatening) periods of time.

When questioned, a surprising number of merchants report that their acquirer, processor, ISO or MLS did not provide satisfactory assistance, and they never received their merchant agreements or any training or practical information for using their merchant accounts.

Amazingly, most merchants were also unaware of the common schemes of fraud that threaten their merchant accounts (unless of course they were already suffering from the ravages of fraudsters).

Few merchants knew about the various measures to prevent account compromise, or at least reduce account exposure. A prime example would be card-not-present merchants who had never heard of address verification system (AVS), let alone card verification numbers (CVV2, CVC2 and CID) or other fraud-reduction solutions. Incidentally, many of these merchants were good, revenue-producing accounts in someone's portfolio before preventable tragedy struck.

Do the examples above sound like any of your merchants? If so, you are at risk of losing part of the revenue stream that you've worked so long and hard to create. Naturally, any portfolio will gradually lose a percentage of its merchants over time through attrition.

However, nothing is natural or acceptable about unnecessarily losing merchants. To wit, if you were a commercial fishing operation and you knew your nets had gaping holes in them, wouldn't you fix those nets?

In the merchant acquiring industry, it would be easy and perhaps convenient to believe that a certain number of avoidable merchant account losses are acceptable. But considered another way, avoidable losses cause you to work harder than necessary. In essence, you spend valuable time on a never-ending quest to "reinvent the wheel."

You find that you need to sign more merchants just to replace those accounts that you needlessly lost. Chasing new merchants to replace lost accounts becomes a required cost of maintaining your desired income stream. This vicious cycle fails to reward you for the good merchants you initially signed.

Do you want to increase your odds of retaining the good merchants you sign? Of course you do. Let's examine how to go about making this positive change. For starters, you might think that changing the merchant agreement is the magic answer. But believe it or not, the merchant agreement is not necessarily the best place to stem the tide of needless merchant attrition.

Certainly, all merchants should receive a copy of their merchant agreement and be able to understand its terms. However, the jam-packed fine print that details the merchant agreement terms does not lend itself to providing practical information on merchant account use.

The solution for stemming needless merchant attrition involves several elements. First, as an acquirer, ISO or MLS, you should clearly identify the perils associated with operating a merchant account in order to promote merchant awareness.

Second, you should identify and present to merchants the various methods of preventing or reducing merchant account perils, perhaps in a menu form. In this way, you assist merchants in selecting "courses" from the solutions menu to fit their needs.

Third, you should either provide your merchants with ongoing education or you should do it through a knowledgeable third party. Fourth, you must enable your merchants to communicate with you in an efficient manner that avoids losses (e.g. properly structured e-mail, standardized forms online or automated telephone menus).

Taken as a whole, the number of good merchant accounts lost for preventable reasons is absolutely mind numbing. Your merchant portfolio is a valuable investment derived from your considerable sweat equity. You must take steps to protect it. Be aware that the ferocious competition for merchant accounts comes not only from your fellow competitors, but also from ill-intended fraudsters and criminals. Loss of your merchants to a competitor's lure of "better, cheaper" processing terms rivals losses caused not only by the vile acts of fraudsters, but also by merchants making mistakes because they are ill-informed.

Don't consider your deals "closed" just because merchants sign the agreements. Instead, inform and educate your merchants and provide efficient lines of communication. MasterCard International, Visa U.S.A., American Express Co. and Discover Financial Services all publish resources in print and online to provide valuable tools for responsible and informed merchant account use.

As the author of "What Every Business Should Know About Accepting Credit Cards" (reviewed in The Green Sheet, Oct. 25, 2004, issue 04:10:02), I strongly encourage you to provide this fast-track, plain-language, practical information to your merchants. It can help them quickly gain understanding of their merchant accounts, related risks, risk prevention, avoidance of common account-killing mistakes and the value of using best practices.

To underscore its value, many banks, ISOs, MLSs and other industry professionals have already purchased the merchant account book and use it for their own in-house training. The educational and return on investment value is obvious. If you provide the same useful information to your merchants, you convert them from potential portfolio risks into valuable allies for strengthening your merchant portfolio.

The challenge is before you. The tools are within your reach and at your disposal. Take up the challenge. Stop losing good merchants and instead reap the residual rewards of your hard-earned and meticulously built merchant account portfolios.

The above article is authored for general informational and educational purposes and is not to be construed as legal advice, nor relied upon as legal advice from The Law Offices of Anthony L. Ogden ("BankCardLaw"). Individual facts, circumstances and applicable law may vary. Therefore, you are strongly encouraged to seek the advice of a qualified attorney regarding your particular matter. BankCardLaw is the micro-niche legal and consulting practice of Anthony L. Ogden, a bankcard attorney with more than 10 years of industry experience and author of the merchant handbook titled, "What Every Business Should Know About Accepting Credit Cards." The mission of BankCardLaw is "strengthening merchant credit card accounts." To obtain more information about BankCardLaw services and publications, visit www.bankcardlaw.com or call 661-775-8527.