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Marketplace Fairness – What It Means

Last month the Senate passed the Marketplace Fairness Act which would grant sates the authority to force e-commerce businesses to collect and remit sales taxes to remote states.  The bill is currently in the House Judiciary Committee awaiting a hearing and further review.

As a credit card processing company that focuses on card not present and e-commerce merchants we have been watching this piece of legislation closely as it’s passage could have a dramatic effect on our clients.

About Chargebacks

Too many chargebacks can put a merchant out of compliance. Both Visa and MasterCard have chargeback ratios they use to determine whether or not a merchant is in compliance.

Issuing banks blocking transactions

Ever tried to process a higher ticket transaction for a client and have it repeatedly come back as declined only to have the client tell you that they are positive they have a sufficient limit and funds on the card for the transaction, and are even somewhat offended by the fact you are telling them it was declined? Many merchants have experienced this frustration and are wondering what the right answer is.

The truth is the customer usually does have a sufficient limit and funds on the card for the transaction. However, because the transaction is outside of the customers “traditional” or “normal” spending habits or they are using a card they haven’t used for some time the issuing bank that gave the customer the credit card will automatically decline the transaction as a precaution against fraud. Customers will have to contact their credit card company and request that they authorize the transaction. They can then go back to the merchant and purchase the good’s or service’s with no problem.

A good message to have on your check out page or to read to your customers would be the following:

“If this purchase exceeds your regular purchasing pattern or you have not used the card you are about to use in a long period of time, please contact your credit card company or your issuing bank and inform them of this purchase. In doing so, you will avoid the possibility of your credit card company and/or issuing bank declining the card due to irregular purchasing activity or possible fraudulent activity.”

Visa Statement on Durbin Legislation

[via Visa Inc. Press Release]

“We are disappointed that Senator Durbin has decided to force unrelated legislation into the financial reform package at the eleventh hour without a hearing or debate.

“Thursday’s vote is another step in a lengthy legislative process. We’re hopeful that when the issue is fully reviewed by members of Congress during the next phase of negotiations, they will conclude the amendment harms consumers, credit unions and community banks and should be eliminated from the bill.

“Visa will continue to work with policymakers to educate them about this flawed legislation that imposes price controls on debit products and allows retailers to dictate which payment card is used by consumers at the point of sale.

“Debit products deliver significant incremental value over cash and check, including guaranteed payment to merchants, greater security and increased sales, all of which the Durbin amendment ignores.

“At the direction of Congress, the U.S. Government Accountability Office (GAO) has twice examined the potential impact of proposed interchange legislation, and confirmed that there is little evidence to suggest that consumers would benefit. In Australia, where price controls have been implemented, consumers have not seen a reduction in retail prices, and instead have experienced reduced consumer benefits and increased costs.

“We hope Congress sees today’s amendment for what it is – an attempt by retailers to increase their profits at the expense of consumers.”

PCI Compliance Regulations

New PCI compliance standards will being going into effect this summer. Not being PCI compliant increases your chances of undergoing a data breach, which has significant repercussions and could cost you your business. If businesses don’t comply to the PCI standards they may be fined anywhere from $10,000 to $500,000 or more per breach. Incidents currently lead to a minimum of $12,000 in forensic investigation and legal fees. Merchants can be liable for chargeback fees, costs to cover fraudulent purchases, re-issuance fees at $5-25 per compromised card, and possibly paying to supply security monitoring of all compromised accounts. Businesses may also face the possibility of having their ability to accept credit cards revoked all together.

A detailed description can be found here.

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