A Message to High Risk Payment Processors and the Feds

A Message to High Risk Payment Processors and the Feds

Remember that episode of The Office… 

…when Dwight is named interim regional manager of Dunder Mifflin’s Scranton branch while Michael interviews for a position at the corporate offices in New York?

Dwight wastes no time in strong-arming and alienating the staff in the Scranton office.

The U.S. Department of Justice made a similar, not-so-great impression when it launched Operation Choke Point, the antifraud initiative to cut off banking services to certain high risk industries – and their payment processors – in 2013.

To many in the payments industry, the DOJ’s Operation Choke Point is like Dwight’s brief reign at Dunder Mifflin: Well meant, but misguided.

By making high risk payment processors as culpable for fraud as a suspected fraudulent merchant, the DOJ is alienating a valuable source of assistance.

Our Message to the DOJ (and the CFPB and FTC)

When it comes to vetting high risk merchants, we at Instabill want the DOJ – and the Consumer Finance Protection Bureau and Federal Trade Commission for that matter – to know that we’re on their side. When our merchant account managers are underwriting prospective merchant partners, we air on the side of caution: We simply won’t board them if we suspect fraud or illegal activity.

And we feel 99 percent of the high risk payment processors in the U.S. would do the same.

In his April 24, 2014 guest blog post for The Hill, Jason Oxman, CEO of the Electronic Transactions Association, captured the flaw of Operation Choke Point in one sentence:

‘Because of this shared distaste for fraud, payments companies are better partners to law enforcement than targets.’

Enhance Your Merchant Account Underwriting

Recently, the Consumer Finance Protection Bureau filed a lawsuit against Intercept, a North Dakota-based payment processor, on June 6, claiming its underwriting practices fell short and enabled clients to bilk millions of dollars from consumers for bogus transactions.

We have no idea of the situation with Intercept, only what we’ve read. If there is anything high risk payment processors can take away from this, however, it is that we are in an era in which we can never allow lapses in underwriting a merchant account.

High Risk Payment Processors: Share Some of Your Merchant Underwriting Methods

There are several Know-Your-Customer (KYC) documents that all processors request, such as a driver’s license, 3-6 months of business bank statements, personal statements and credit card processing, utility bill, etc…

We’re curious, however, to hear about some of the different underwriting tactics high risk payment processors use in vetting merchants. Leave us a comment below.

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