aught up in what seems like a ridiculous, one-hour-turnaround race for merchant approval, ISOs are offering same-day approvals and approving certain types of merchants automatically. The types of businesses involved typically swipe above a certain percentage of transactions, do not provide future services beyond a certain number of days and are below certain monthly volume and average ticket thresholds.

I've been amazed, however, at how many merchants appear to fall within auto-approval parameters. Many are being activated without completion of required underwriting. The card Associations demand that acquirers do certain things before they enter into a merchant agreement: They must determine that prospective merchants are financially responsible, have principals with no significant derogatory background information and will abide by Association regulations and applicable law.

Acquirers may obtain this information through credit reports, personal and business financial statements, income tax returns, credit checks, background investigations, reference checks and other information lawfully available.

Acquirers must also do the following before approval:

• Query the MATCH (Member Alert to Control High Risk merchants) database to determine if the prospective merchant has been terminated for cause.
• Inspect the merchant's premises and records to ensure the enterprise has the requisite facilities, equipment, inventory, agreements and personnel and, if necessary, license or permit and other capabilities to conduct the business. If the merchant has more than one outlet, the member must inspect at least one.
• Verify that the merchant is a valid business.
• Investigate the merchant's previous merchant agreements.
• Obtain a detailed business description for MO/TO merchants.

ISOs are subject to fines for boarding merchants before doing a MATCH inquiry.

The regulations further state that an acquirer must collect the following for all merchants:

• Assumed business (DBA) name
• Legal business name
• Outlet locations including street address, city, state and nine-digit ZIP code
• Federal taxpayer identification number, either a federal employer identification number or Social Security number
• Incorporation status, e.g., corporation, partnership, sole proprietor, nonprofit or other
• Full first and last name, including middle initial, if the merchant is a sole proprietor
• Merchant category code and, if applicable, any secondary merchant category codes
• Indication if a merchant is a small and/or disadvantaged business.

Also, the acquirer must keep records of the merchant's termination date and reason for termination if the acquirer/merchant relationship is terminated.

As evidence that the acquirer has completed the requisite screening, MasterCard insists, at a minimum, that the following be retained:

• A report from the credit bureau (or, if the credit bureau report is incomplete or unavailable, the written results of additional financial and background checks) for the business, its principal owners and officers.
• A written inspection report of the merchant premises, including verification by the inspector that the merchant is conducting business in accordance with its agreement; that the merchant, if required, has a valid license or permit; and that staff and stock levels are adequate.
• Proof of the member's inquiry into the MATCH system, including a copy of the inquiry record. (You should print a hard copy of the merchant's MATCH info and place it in the merchant's file.)
• A statement from the merchant about previous processors, including the names of prior processors and the reasons for terminating the agreements, if applicable.

For quick approval, merchant level salespeople should fill out a merchant's entire application and gather sufficient information to describe the business and prove that the merchant is legitimate. Remember, auto-approval of merchants based solely on information from applications falls short of meeting the requisite card Association rules and acceptable standards for due diligence.

David H. Press is Principal and President of Integrity Bankcard Consultants Inc. Call him at 630-637-4010, e-mail dhpress@ibc411.com or visit www.ibc411.com .