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Annual Payment Processing

Posted by Alex Neir on Wed, February 22, 2012 @ 12:57 PM
Annual Payment Processing

Annual payment processing is one of the more difficult features to get approved when setting up a merchant account. The difficulty in getting this feature approved is due to the increased risk of liability for the processor. Risk of liability is increased for the processor based on the additional time the customer has to chargeback against the business.

With a typical merchant account, products and services are provided in full at the time that the credit card payment is collected. At that point the customer has up to 18 months to initiate a chargeback if the business does not fulfill their obligation to provide the product or service promised. In the situation of an annual payment the business is providing the product or service over an entire year. Therefore, the timeframe for initiating a chargeback is extended an additional 12 months for a total of 30 months of liability for the processor.

It is very important for a business looking to offer annual payment options to disclose this intent to the processor in the application process. Failing to disclose intent and proceeding with annual payment processing can result in a violation of the merchant account contract. Violating the merchant account contract will lead to the account being closed, the business entered on the terminated merchant file and funds for the business held by the processor.

Each business will be evaluated independently to determine if annual payment processing can be approved. Items that increase the odds of a successful approval include:

  • Strong credit of the applicant(s)
  • Strong business financials
  • Strong business history

If you would like a consultation to determine if your business can be approved for annual payment processing please click on the link below and provide us with your contact information. A representative will be in touch shortly to begin the process.

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Tags: Terminated Merchant File, Annual Payment Processing, Chargebacks

Terminated Merchant File | What it is and how to avoid it

Posted by Alex Neir on Wed, January 04, 2012 @ 03:40 PM
Terminated Merchant File

The terminated merchant file, TMF or match file is a database that is maintained by MasterCard and Visa banks (also known acquiring banks) for the purpose of recording businesses that violate their merchant services agreement. This database serves as a reporting agency for the merchant services industry.

All merchant service providers, as a requirement of underwriting, will query new merchant applications against the terminated merchant file to determine if there is a match. The query will include the business name, business address and principal applicant(s) first and last name. If a match is uncovered the application will be declined.

What to do if you are on the terminated merchant file

You must first identify the acquiring bank that placed your business on the terminated merchant file. They are the only entity that can make changes to the listing. Once you identify the acquirer, it’s important to be persistent in requesting the reason for the inclusion on the TMF. It may take multiple calls to identify the right department to gather the information. Remember “kill them with kindness”. You are undoubtedly frustrated with the situation but airing your frustration will only prolong the process and increase your frustration.  Once you understand the circumstances that led to your listing, do everything in your power to correct it and have the listing deleted. This may include legal counsel so make sure your hire a specialist if you choose this direction.

How to avoid being included on the terminated merchant file

  • Read your merchant account contract carefully and avoid any violations.
  • Make sure you remain within the soft limits of your merchant account.
  • Make sure you list your business phone number within the descriptor that shows on your customer’s credit card statement. This gives them the information they need to contact your business about questionable charges. You do not want your customers to call the bank directly.
  • Provide exceptional customer service and put your customers first. Consumers have a lot of power if they choose to contact their issuing bank to complain about your service and charges.
  • Don’t commit fraud.
  • Never run a sale for someone else’s business!

Tags: Match File, TMF, Terminated Merchant File

Match or The Terminated Merchant File (TMF) – Beware

Posted by Alex Neir on Tue, July 12, 2011 @ 03:15 PM
Terminated Merchant File

Match or The Terminated Merchant File (TMF) – Beware

The Match file or, more commonly know as, the terminated merchant file or TMF is a database that the credit card processing industry uses to log merchants that have violated the terms of their contact and have subsequently been terminated.

Similar to how the major credit reporting agencies track consumer behavior in an effort to establish a credit profile. The Match or TMF database is used to flag business and principals that have miss-managed their merchant account in the past and been terminated.

When an application for merchant services is received the processor will query the Match or TMF database to determine if the business or principals have been terminated in the past. If a possible match entry is indicated it is the responsibility of the processor to determine if the entry is for the same business and/or principal(s) seeking account approval. If an exact match for business or principal is determined the processor will then inverstigate the reason for the match entry. At that point the account will be declined or a conditional approval will be granted which states that full approval is subject to the pervious processor removing the Match entry.

Once a business or principal is placed on the Match or TMF it is extremely difficult to get a merchant account approved. It is also very difficult to get a business or principal removed from the match or TMF database.

If you find that you or your business is on the Match file it is very important to determine what processor placed you on the file. Next you will want to contact that processor to determine the reason. Once you have determined the reason it is essential to rectify the situation, if possible and request removal from the database. 

Tags: Match File, TMF, Merchant Account Termination, Terminated Merchant File

Merchant account early termination fees | How they work

Posted by Alex Neir on Tue, May 31, 2011 @ 07:15 AM
Early Termination Fee

Merchant account early termination fees | How they work

Most every merchant account contract will include an early termination fee. The early termination fee is charged to the business if the business closes the account before the end of the contracted term. It is important to understand what the early termination fee is before accepting the terms of service from your merchant service provider.  The early termination fee will be spelled out in the service agreement so be sure to review the contract before signing.

Important things to know about early termination fees:

  1. It can be negotiated
  2. It can be calculated multiple ways
  3. Be careful with refusal to pay

Negotiating your early termination fee

Some merchant service providers will allow for the early termination fee to be negotiated. Typically if you select an Independent Service Organization (ISO) to set up your merchant account the early termination fee is at the discretion of the sales representative. For example, if the business goes “out of business” it is reasonable to expect that the early termination fee to be waived. Make sure to have this conversation up front and get the agreed terms in writing.  

Early termination calculation

The early termination fee can be a set amount, a prorated amount based on the remaining contract term or a combination of both. As an example we will use the following to illustrate how the early termination fee is calculated.

  • 3 year contract term with the early termination fee equal to the greater of $250, or $35 multiplied by the number of months remaining in the then-current term.
  • Contract approved 01/01/2011
  • Termination on 04/01/2011

Early termination fee = $1,155 (33 months remaining X $35)

Be careful if you decide not to pay

It can be frustrating if you are charged an early termination fee for terminating a contract with a merchant service provider for a justified reason. It can seem unfair and unjust especially if you feel the service you were provided was unacceptable and you terminated to end a bad experience. It is commonly thought that a simple solution is to close the account for which the termination fee will be deducted from. I caution this approach as it allows for your provider to add your business to the terminated merchant file (TMF).  The TMF is a file that represents businesses that have been banned by the industry. Once a business has been added to the TMF it is very difficult to get it retracted. Additionally, it makes it next to impossible to get a new merchant account set up. 

Tags: TMF, Merchant Account Termination, Terminated Merchant File, Early Termination Fee