How Am I In Compliance With The Card Networks?

Alex ForbessSmall BusinessLeave a Comment

Unfortunately, that answer doesn’t immediately provide a ‘yes/no’ response. Each card network has its own rules and interpretation of compliance. Their interpretations are generally the same. But the extent to how each rule is described can cause frustration, confusion and exhaustion for merchants and acquirers alike. Fortunately, we’ve read through their rules in order to understand how a merchant can show compliance.

We regularly give advice on how to comply with disputes, such as time limits and creating a compelling response. But we skipped how you should comply with the networks as a business. Again, their interpretations are generally the same. And we’ll let you know where one card network has a specific requirement. Here’s what you need to know in order to be in compliance with the card networks.

Merchant Agreements

A merchant agreement is established by the participating acquirer. All acquirers must have an approved agreement if merchants want to accept transactions from American Express, Discover, MasterCard and Visa. The agreements will more or less cover all the requirements for compliance. But here are some obligations that are distinguishable in your merchant agreement. It wouldn’t hurt to disclose these obligations within your terms and conditions.

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Why Worry About Compliance?

The Chargeback App is already compliant with the card networks' rules.

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Merchant Agreement Requirements

Interpretation

Disclosure for the merchant location

You must disclose the location of where you’ll accept card transactions. It has to be a physical location that an acquirer can review your standing. This includes your business license and any documentation that shows you are authorized to conduct business.

Also, you need to disclose any businesses that are considered ‘submerchants’. Submerchants are your payment processors and other parties that manage the cardholder’s data.

Use of Marks

You must visibly disclose that you accept the card network. Any discounts related to a card network (i.e., American Express) must be disclosed to the acquirer and the cardholder.

Transaction Responsibilities

Your terms and conditions must disclose how you plan to fulfill the transaction. More details will be in Transaction Processing.

Transaction fulfillment includes shipping obligations and other matters listed in your terms and conditions. This will also be tied to the policies you’ve established for customer satisfaction. Check out this post to learn more about how you should frame your policies.

Card Acceptance

Card acceptance outlines how merchants need to accept all types of cards that is available within a card network. This includes accepting affiliated brands, such as MasterCard’s Maestro and Cirrus. This is crucial if you plan to promote your business that accepts, for example, American Express loyalty programs. All of their requirements originate to one universal phrase:

Honor All Cards

The cards are flagships for a seamless cardholder experience. American Express, Discover, MasterCard and Visa all ensure their cards are accepted at participating locations. You could be one of them if you plan to earn some of its revenue. Keep in mind that merchants are allowed to influence cardholders to make alternative payments, such as cash. All of their rules give room for the possibility of technical issues with terminals.

However, the push to alternative payments cannot go as far as discriminating against the use of a certain card. Therefore, you cannot push to accept credit over debit, and vice versa. And it cannot express discouragement to accept a specific card network when your business claims to accept more than one network. If you don’t accept a certain network, please disclose it within your terms and conditions, and your business. All card networks [that are displayed with your business] must be treated as equals.

Surcharging

This is tricky. The acceptance of surcharges depend where you establish yourself as a business. And it can vary on the type of carrier you use and what laws govern your business and shipping inquiries. It’s always best to disclose every charge or discount that is affiliated to a transaction. And its value should be presented in the cardholder’s receipt and billing statement. Visa went to great length in explaining how merchants must disclose surcharges. Notice how there is an emphasis on must, not should.

You can find Visa’s description of surcharge disclosure in Chapter 5, under section 5.6.1.5, page 382 of Visa Core Rules and Visa Product and Service Rules. Or you can take a look at our table below:

Surcharge Disclosure – US Region and US Territories

Transaction Type

Point-of-Entry

Point-of-Interaction

Face-to-Face Transaction

Main entrance(s) of the Merchant Outlet, in a minimum 32-point Arial font, but in any case no smaller or less prominent than surrounding text

Every customer checkout or payment location, in a minimum 16-point Arial
font, but in any case no smaller or less prominent than surrounding text

Electronic Commerce Transaction

The first page that references credit card brands accepted, in a minimum 10-point Arial font, but in any case no smaller or less prominent than surrounding text

Checkout page, in a minimum 10-point Arial font, but in any case no smaller or less prominent than surrounding text

Mail Order Transaction

The first page of the catalog that references credit card brands accepted, in a minimum 8-point Arial font, but in any case no smaller or less prominent than surrounding text

Mail order form, in a minimum 10-point Arial font, but in any case no smaller or less prominent than surrounding text

Telephone Order Transaction

The first page of the catalog that references credit card brands accepted, in a minimum 8-point Arial font, but in any case no smaller or less prominent than surrounding text

Verbal notice from the telephone order clerk, including US Credit Card Surcharge amount

Unattended Cardholder Activated Terminal

Main entrance(s) of the Merchant Outlet (if applicable), e.g. gas (petrol) station store, in a minimum 32-point Arial font, but in any case no smaller or less prominent than surrounding text

On the Unattended Cardholder-Activated
Terminal or virtual disclosure on the payment terminal screen, in a minimum
16-point Arial font, but in any case no smaller or less prominent than surrounding text

The disclosure formats for American Express, Discover and MasterCard are relatively similar to Visa’s format. Also, merchants must notify their acquirer and the networks 30 days before they begin surcharging. The maximum percentage to surcharge is 4%. The only card network that does not allow surcharges is American Express.

You can notify Discover, MasterCard and Visa by submitting forms on their website. Remember to notify your acquirer as well:

I want to notify Discover

I want to notify MasterCard

I want to notify Visa

Transaction Processing

The way you process transactions will need to be cooperative with your acquirer and the card networks. You are obligated to protect the cardholder’s data (and you should disclosure your security proceedings in your terms and conditions). But there an emphasis to verify the legitimacy of the card and the cardholders themselves.

In short, you must disclose which payment processor(s) are involved in transaction processing. There is no direct statement that says you can disclose your payment processor as a ‘third party’. It may better to state the company name that will process cardholder’s transactions. For example, you can state that Braintree will process the cardholders transactional data. You don’t have to provide verbatim details on how your payment processor handles their data. You’ll just need to state enough to let cardholders know that their data will be handled other parties.

Speaking of Data Compliance…

Do you know how to be in compliance with the General Data Protection Regulation (GDPR)? It takes effect on May 18. But it’s never too late to start learning now.

You’ll understand how to comply with cardholder information coming from the European Union. There will also be new rights that you’ll have to abide, such as deleting an EU cardholder’s information upon request. Read more.

Risk Management/Assessment

Acquirers have an obligation to the card networks. They must assess whether a merchant is capable of managing the cardholder’s data. Any limitation may result in being non-compliant to their rules. That’s why metrics such as chargeback ratios exist in the first place. After all, the card networks assess whether an acquirer is suitable to process their cardholder’s information. It should be no surprise that acquirers will assess you, and determine if you’re a high- or low-risk merchant.

Disputes

And finally, the ultimate test of compliance boils down to dispute management. The time limits each network sets and the compelling evidence are two of several factors that you’re in compliance for efficient dispute resolution. You can learn about their time limits, transaction modifiers, inquiry requests and reason codes all within the Chargeback Reason Code Encyclopedia.

We can also help you with compliance with another resource, the Chargeback App. Its automated tools are always updated, so that it extracts the right information under the card networks’ standards. Feel free to contact us to learn more about the App and learn about its prices. You can also request a demo to gain a little experience of our way of dispute management. Compliance and real-time resolution is included.

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