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charging credit card you have on file September 1, 2017

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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charging credit card you have on file
September 1, 2017
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charging credit card you have on file
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Ken,
    Here's a weird issue that has led to me receiving more customers. Recently a competing company decided to start automatically charging monitoring fees to credit cards that they had on file. These were not approved charges by the customer, but this company had kept the card info on file from previous payments.     Last count, I've gained 7 customers in 3 weeks solely because of this.
    I am under the belief that if not authorized to charge the card, then you'd be breaking a lot of rules laid out in your Credit Card Merchant contract, and I would assume many laws pertaining to theft.
    I was discussing this with another company's owner (much friendlier competition), and he asked if you were allowed to do that if a customer defaulted on payments, but you already had a credit card on file. Could you charge that card as a last resort, before sending to collections? I told him that I'm pretty sure that's just as bad, but said I'd pass that question along to you.
    If nothing else, you should have just gotten one more subscriber to your newsletter.
    Thanks,
Benjamin Simmons
Shreveport Security Systems
Shreveport, LA
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Response
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    You need express authorization from your customer to charge the credit card.  That authorization needs to be for each charge, or blanket authorization to charge a specific monthly amount or authorization to charge all amounts that are owed pursuant to the contract.  You need to stop charging the card upon demand by the customer.  When in doubt, don't charge the card.  The Standard Form Agreements all have provision for credit cards, permitting you to charge the card for recurring charges as well as other charges that may come due. 
    Tom Aronica, CEO of SkyBank Financial, a credit card processing company that handles lots of alarm companies [and listed in The Alarm Exchange for long time - with no complaints and only favorable reviews, I might add] responded to my request to answer the question, as follows:
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Ken
    The card associations have documented business rules pertaining to how to property authorize transactions on a card.  The language in your subscriber agreements and/or authorization forms that your subscribers should be signing will determine what authorizations you have to charge their card. 
    The authorization form templates we provide our customers state that they are providing their consent to allow you to charge their card at regular intervals until they revoke that authority in writing.  That said, if you have the proper authorization from the subscriber then charges would have been pre-approved in advance and you should be able to contest and win any disputes the subscriber might make with their card issuer.
    In the event you do not have proper authorization and the subscriber disputes the charge with the bank, you will be liable to return the funds and pay any fees that your merchant processor might assess for chargebacks. 
    I hope this helps!
    With Gratitude,
Thomas J. Aronica, CPP, Chief Executive Officer
www.skybankfinancial.com
Miami Shores, FL 33138
786-360-6391
800-617-9980 x601
taronica@skybankfinancial.com
www.skybankfinancial.com
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PS Response
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    By the way, if you're not taking credit cards yet, you need to start, now.  Give Tom a call.  The small processing fee is more than made up by the efficiency of getting paid in timely manner; no more bounced checks or waiting for the mail.
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com