September 23, 2010

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Question:

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Ken

    Is it acceptable and legal for a supplier to claim they do not take credit cards but they will accept a credit payment through a third party company and  charge a 2.5% payment processing fee? 

    I am in this situation and the supplier claims this is legal and acceptable practices.  I tried to explain my situation to the bank that issued the credit card and got no help. Your comments are appreciated. Thank you.

Isaac

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Answer:

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    I asked Tom Aronica of PCI Professionals to respond to this question. 

    I've promoted PCI Professionals to alarm companies and asked Tom how this forum has helped him and alarm companies who contacted him.  His response to that question is also below.

    Isaac - to answer your question:  It is very much illegal for a third party to charge a fee to process the transaction for you.  It unfortunately also seems that charging “Convenience Fees” in the Security Industry is going to be hard to pull off given that most transactions are for the recurring billing of the monthly monitoring contracts.   Feel free to give our office a call at 800-617-9980 to discuss if your business qualifies or for a free rate quote and analysis.  You can also visit our website and apply online at www.pciprofessionals.com/apply-now.htm.

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    Ken, to answer your question,

    We are doing great with the alarm companies who contacted us because of you, and so are they !  100% retention, never 1 complaint, all up and running at peak efficiency; we call them quarterly to check in, they all love us.  We have been able to save every alarm company money and support them in a way their other providers have not – not to mention at this point I REALLY know the security industry very well so it makes it easy for my staff to work with your readers.  At this point we know the in’s and out’s of all the software and hardware they use and I guarantee in writing that I can save them money, so it really only comes down to impressions.

    Thanks again for your support.

Best Regards,

Tom Aronica

PCI Professionals

800-617-9980 x 3201

www.pciprofessionals.com

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and for those who want a more technical response, here is Tom's additional comments on convenience fees

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Ken

    All merchants that meet the following criteria are allowed to assess their customers a “convenience fee”.  This fee can be assessed by a merchant to a cardholder for payments processed through an alternative payment channel that offers the cardholder an added convenience, thus a convenience fee is allowable.  An alternative payment channel is defined as by phone or over the internet, BUT the first payment needs to be made by a customary payment channel like card-present or by US mail. 

    A convenience fee cannot be assessed to payments received in the customary, or standard, payment channel since there is no added convenience to the cardholder.

    The standard or general Convenience Fee rules are:

Convenience Fee can only be charged in an alternative payment method.

Non face to face transactions only.

Disclose it is for using an alternative payment method.

Has to be a flat or fixed amount (not a percentage of the sale).

Applicable to all forms of alternate payments accepted.

Included in the transaction total (no separate sale).

Disclosed prior to completion of sale.

Cannot be charged by a third party.

Cannot be added to a recurring transaction.

Cannot be assessed by e-commerce (online merchants only).

The Fee must be clearly and conspicuously disclosed to the cardholder and afford the cardholder an opportunity to opt out of the sale.

The fee should not be advertised as a fee assessed by MasterCard or Visa.

The convenience fee cannot be advertised or otherwise communicated as an offset to the merchant discount rate, the merchant discount fee is the fee the merchant pays to its Acquirer to acquire transactions.

    Violations and Potential Fine Assessments

Fines for Visa start at $5,000.00; MasterCard starts at $2,000.00.

Visa/MC receives violation notifications from Issuing banks or internal audit and notify the Acquirer (Wells Fargo)/Processor (First Data) responsible for the merchant account.

Merchant must be compliant within 15 days of notification from Merchant Compliance.

If merchant is non-compliant the fine assessments will increase on a monthly basis to a maximum of $500k.

Merchant credit card processing account can be placed on hold, and/or terminated.

https://usa.visa.com/checkoutfees/contact.jsp to report a merchant who is in violations.

http://www.mastercard.com/us/personal/en/contactus/merchantviolations.html to report a merchant who is in violations

 

Best Regards,

Tom Aronica

PCI Professionals

800-617-9980 x 3201

www.pciprofessionals.com