Heads up: Major merchant account changes ahead

[RickDuris]

Hi all,

For those copywriter's who focus on free trials, continuity programs, try before you buy, deferred billing, shipment only, etc. I just got this letter.


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(PowerPay is our merchant account who sent me the following notice about new Visa and Mastercard guideline.) This is not exclusive to PowerPay and it is across the board for all US merchant accounts.

This is a copy of the email that was sent to me…

PowerPay wants to inform everyone of changes expected from the Payment Brands regarding practices that are considered “Brand Damaging”. As you may be aware, both Visa and MasterCard are taking action in response to increases in consumer disputes related to card-not-present and direct response products and services.



PowerPay is endorsing the adoption of Best Practices to support our merchant base in conducting business in a manner that protects both businesses and consumers from fraud. To date no formal announcement has been received, however PowerPay is issuing this communication now in an effort to educate and assist our agents/merchants in complying with anticipated Payment Brand mandates and actions.


MasterCard has recently warned the Acquiring community that “Negative Option” enrollment will be considered a “Brand Damaging” business practice. “Brand Damaging” is a very broad term and is still being defined, but in light of recent fines to our counterparts, we must be proactive. Indications are that MasterCard will require immediate termination of merchants identified as using this business practice, along with any other practices considered “Brand Damaging”. This follows recent policy changes from Visa regarding descriptor formats and disclosure of corporate entities related to Direct Response offers, with the intent to enforce all chargeback and transaction monitoring programs as defined by the associations.


PowerPay cannot accept merchant applications for products and/or services employing “Negative Option” enrollment, in addition to the following practices:

• Marketing models that employ “Free-Trial”, “Deferred Billing” and/or “Shipping Only”. Customers must be receiving a tangible good or contracted service in exchange for charging of payment cards. Incentivized discount offers are acceptable when the cardholder is receiving something in exchange for payment, however we will be unable to support accounts engaging in hidden or delayed charges and ‘free’ offers that are not truly free.
• “Cross-Selling” and “Up-selling” business practices. All sales should be directly between the business entities (merchant) processing the transaction and the cardholder, with cardholder authorization for all purchases.
• Per Payment Brand guidelines, the use of multiple merchant accounts, billing descriptors and merchant processors may be viewed as an attempt to avoid chargeback monitoring programs and is prohibited. Perceived non-compliance has led to termination of processing relationships. e-onlinedata will review the business consideration for opening multiple merchant accounts to ensure compliance with Payment Brand guidelines.
• Transactions generated from internet traffic and all other lead sources must be managed and monitored for potential fraud using an approved system. Third Party service engagement may be a requirement for account approval.

The FTC has recently published guidelines regarding “Negative Option” enrollment programs and is taking a very aggressive position against merchants utilizing/employing this business practice. Recommendations take in part from the FTC’s website may include but are not limited to the following:

• Material terms should be disclosed in a clear, concise manner. Unnecessarily long or inconsistent terms are viewed as an attempt to mislead the consumer.
• Terms should be disclosed in a conspicuous manner, clearly placed and labeled on websites in a location that indicates the importance and relevance to the transaction. Fonts and colors must be easy to view.
• Material terms must be disclosed prior to completion of the transaction and before a financial obligation is incurred by the consumer.
• Customers must provide affirmative consent to any offer, examples include a mandatory “I Agree…” statement checkbox, where the customer is acknowledging the Terms and Conditions of the offer and consents to be entered into continuity program as a result of completing the transaction. Pre-checked boxes do not qualify as affirmative consent.
• Merchants must not discourage or make difficult in any way the disclosed cancellation procedures and all cancellation requests must be honored in accordance with the stated terms of the transaction.

[RickDuris]

Hi Alan50, This is not about PowerPay. Maybe I didn't quite make that clear. Do the homework. This is an industry-wide initiative. - Rick Duris

[marciayudkin]

Marketing models that employ “Free-Trial”, “Deferred Billing” and/or “Shipping Only”. Customers must be receiving a tangible good or contracted service in exchange for charging of payment cards. Incentivized discount offers are acceptable when the cardholder is receiving something in exchange for payment, however we will be unable to support accounts engaging in hidden or delayed charges and ‘free’ offers that are not truly free.

I'm having a little bit of a hard time understanding what's acceptable and not under this rule. If people do receive something tangible for a "shipping only" offer, then is that clearly OK? Anyone have any references commenting on this particular rule?

Thanks,
Marcia Yudkin

[MikeHumphreys]

Originally Posted by Alan50

Sorry Rick. I failed to make clear that I process hundreds of daily orders using multiple non-US MIDs for Free Trial & Forced Continuity products and thus I actually have experience with what I say and know what the hell I am talking about. It a US-wide initiative. You do the homework.

Seeing that 75% of the board is U.S. based and everyone selling something online is doing business with U.S. citizens, then you should pay attention to this -- regardless of where your business is located.

[MikeHumphreys]

Rick,

Thanks for bringing this up. It does change how I'm going to advise clients on order form setups and back-end systems here on out. Last thing I want to see happen is my client get their merchant account killed because of neglecting something like a checkable box on the order form.

Take care,

Mike

[Collette]

Originally Posted by marciayudkin

I'm having a little bit of a hard time understanding what's acceptable and not under this rule. If people do receive something tangible for a "shipping only" offer, then is that clearly OK? Anyone have any references commenting on this particular rule?

Thanks,
Marcia Yudkin

That's how I read it, Marcia. As long as they receive a tangible good or service in exchange for charging their card for any amount, you're OK.

Do things like digital products fall under the strict definition of "tangible"? I don't know.

"Shipping only" would fall under this, so long as the shipping amount is clearly displayed.

This would prevent people from being floored at the exorbitant shipping charges they get when ordering from those "Item-of-the-Month Free Trial Offer for Just Shipping and Handling" companies.

Re: "service" (and that would encompass membership sites): I think that's a little more murky. What if the customer decides that the service they received wasn't - by their estimation - a "service"?

[Joint Venture]

Thank you for the advice. Appreciate it.

[MikeHumphreys]

Originally Posted by Alan50

Not even half of the traffic to this forum is US:

warriorforum.com - Site Info from Alexa



About half of my orders is US.... and?



...

Alexa's stats are compiled from people who have their toolbar installed. Most people don't. A lot of marketers don't either.

Even with their flawed stats, the U.S. is still almost 5X bigger than the next largest group (U.K.). So even Alexa says that the U.S. makes up the largest percentage of the members here.

About half of your orders are U.S.... so are you willing to risk losing half your sales because your continuity program didn't dot every 'I' like Visa/Mastercard want?

If your copywriter wasn't aware of the changes and gave you the wrong advice on your next continuity program... advice that caused your merchant account to get frozen or cancelled... wouldn't you be ticked off?

You bet.

That's my point.

Most of the serious for-hire copywriters ($4K and up) are also advising our clients on the marketing side of things too. It's in our best interest -- and our clients -- to make sure we don't give them bad advice.

[RickDuris]

Hi Alan50,

I am not trying to pick a fight at all. I posted this as a gesture of goodwill. If it doesn't apply to you, no worries.

My comment on "doing the homework" was meant to be desire for you to check things out for yourself and see if they apply to you. Again, if they don't, no problem.

All the best,

- Rick