3 Challenges Facing High Risk Merchants (and a Solution)

3 Challenges Facing High Risk Merchants (and a Solution)

Today’s high risk merchant has enough challenges: Finding adequate payment processing solutions, keeping chargebacks under the 1 percent threshold, and mitigating fraudulent activity.

In the session titled Lay of the Legal Land: Review of Legislation That Could Affect Your CNP Business at the 2016 CNP Expo Wednesday, the panel of legal payments experts spoke on current and new challenges facing high risk merchants, and they involve the Consumer Finance Protection Bureau (CFPB) and the Federal Trade Commission (FTC).

It’s a new climate for high risk merchants. With due diligence, however, it is certainly navigable. Here are three highlights from the discussion:

1. The CFPB and FTC are after high risk merchants

This is nothing new. Operation Choke Point was incepted in 2013 to “choke out” high risk businesses — businesses it deems rife with fraudulent merchants — such as debt collection, payday lending, ammunition and tobacco.

The problem with Operation Choke Point is that the CFPB and FTC are targeting both fraudulent merchants and their payment service providers (like Instabill). Jason Oxman, CEO of the Electronic Transactions Association (ETA) and a panelist in Wednesday’s session, authored a blog post in April 2014 for The Hill listing the demerits of Operation Choke Point.

Mr Oxman wrote, “Because of this shared distaste for fraud, payments companies are better partners to law enforcement than targets,” which we wholeheartedly applaud.

As a high risk payment processor, the best advice we can offer in dealing with Operation Choke Point is to use it to become a better, smarter merchant.

2. Increased PCI Compliance Regulation

Wednesday’s panelists revealed that the FTC recently sent letters to nine PCI compliance vendors inquiring how their services were working. Such news indicates the FTC is discussing regulation on PCI compliance.

In a perfect world, every merchant is PCI compliant and fraud would be nearly non-existent. However, PCI compliance can be expensive to SMEs, who should have the right to choose their own security methods.

3. E-Commerce Sales Tax? It May Happen

Legislators are considering the Marketplace Fairness Act, proposed in 2013, which would allow states to to collect sales taxes from retailers with no physical presence in their state. The act would require all e-commerce merchants to collect and remit sales tax, and is currently pending legislation.

Instabill’s (and the ETA’s) Solution for its Merchant Partners

As the CFPB and FTC continue to increasingly target high risk merchants, the Electronic Transactions Association — of which Instabill is a longtime member — offers the ETA Guidelines on Merchant and ISO Underwriting and Risk Monitoring, published in 2014 with an updated version 2.0 released last January.

It is the consummate resource for the challenges facing high risk merchants: mitigating chargebacks and fraud as well as finding solutions for vetting and underwriting prospective merchants (in turn, avoiding investigation by the CFPB and FTC).

The ETA Guide is a free download for ETA members, but Instabill merchant account managers will gladly refer to it for our merchant partners. To find out more, contact an Instabill merchant account specialist at 1-800-318-2713 or select the live chat option below.

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