According to the Housing and Economic Recovery Act of 2008, beginning on January 1, 2012, Acquirers in the electronic payments industry were required to report credit card payments to the IRS.

In addition, Acquirers are also responsible for performing backup withholding on any merchants whose information (name and tax ID) does not match IRS records.

All merchants are encouraged to confirm that their merchant services provider has the most current, up to date and accurate TIN information on file. Merchants should consider submitting a copy of their W-9 form or a copy of the SS-4 form as part of the application process or upon any changes to their businesses legal structure that shows exactly how the merchant’s name is filed with the IRS therefore substantially reducing the possibility of a mismatch.

In January 2013, Vantage will facilitate the mailing of 1099-K documents to all its merchant clients. In late 2013, if the IRS reports non-matching records, those merchants will receive a backup withholding notice (a B-Notice). If a merchant does not respond to the B-Notice and request for W-9, their merchant account must be placed on backup withholding.

If the proposed settlement in the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation case is approved, merchants will receive billions of dollars, a temporary Interchange rate reduction and the ability to surcharge card payment transactions. In return, the agreement releases Visa and MasterCard from future legal claims regarding Interchange, network rules, merchant fees and related issues by merchants.

Both the National Grocers Association and the National Association of Convenience Stores say they will oppose the agreement on the basis that the agreement does not address how Interchange is set or the complexity of Interchange fee schedules. Target and Wal-Mart are not plaintiffs in this case, but have criticized the proposed settlement for similar reasons and because it would grant Visa and MasterCard releases from future legal claims, even by merchants who aren’t part of the settling class.

Over the next few months, the judge will make a decision to approve or reject the proposed settlement. The next step is a “fairness hearing” in Brooklyn federal court. Despite some objections, most analysts don't expect enough merchants will opt out of the settlement deal to derail it. One reason is that without a settlement, it will take many more years and cost a lot more money to take the case all the way to trial. Another may be that the largest retailers have secured a collective bargaining provision to negotiate lower Interchange rates directly with the payment networks. It has been reported that 15 of the top 100 retailers representing 80% of Visa and MasterCard credit-card volume have already agreed to a separate settlement with the card networks. And while merchants give up their right to sue the networks and credit-card issuers over similar issues, lobbying efforts at both the federal and state levels are expected to continue for merchant rate Interchange reductions and simplification.

In the proposed settlement of the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation case, merchants would win the ability to impose surcharges on customers who use card payments.

However, according to analysis of the proposed settlement, the ability to surcharge customers includes numerous restrictions and requirements:

• The surcharge amount will be limited by a cap established by Visa and MasterCard and by card type (debit card surcharge allowances to differ from credit card surcharge allowances)
• Merchants will be required to notify Visa and MasterCard before surcharging begins.
• Merchants post signs notifying customers that they surcharge
• Merchants must include the surcharge amount of any fee on receipts
• Merchants are not allowing a surcharge on Visa and MasterCard cardholders greater than charges to customers paying with American Express or Discover cards. For practical purposes, since AmEx prohibits surcharging, merchants would be forced to drop this payment choice.

Of course these surcharge rules will not apply in the 10 states that prohibit that practice by state law to protect consumers. The states that prohibit surcharging for credit cards include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. If more merchants implement payment type surcharges at the point of sale, we can expect consumer advocacy groups to push for even more state regulations to prevent what they will frame as gouging consumers with fees.

Then there is the question of how payment surcharge fees will hurt sales. It is argued that surcharging can cause consumers to think twice about their purchase at the checkout counter, reduces the amount of goods and services consumers will buy and lowers the average sale transaction. In highly competitive consumer markets, customers are expected to respond negatively to payment surcharges. Therefore, surcharge fees are expected to be market-driven and seen in environments where consumers have little choice but to pay them.

Merchants have long been able to offer a cash discount, pricing as an additional reward for cash carrying customers, rather than a penalty for those paying with plastic. And recent industry changes already allow merchants greater flexibility to steer their customer's payment choice.

• MasterCard and Visa Settled with Department of Justice to allow merchants more options to steer consumer payment choices
• Merchants also won Card Acceptance changes under the Dodd-Frank Act

Instead of surcharge fees, today’s best practice for implementing payment steering policies include offering a discount or benefit to encourage your preferred payment method, offer a promotion after the transaction is completed (like a credit on the billing statement or rebate) or use a separate coupon or voucher.

An estimated 7 million retailers will be affected by a proposed settlement in the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation case.

According to Reuters, it has been announced that Visa and MasterCard along with their card issuing banks have agreed to settle the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation case with U.S. retailers for $7.25 billion. If approved by the judge, it would be the largest antitrust settlement in U.S. history.

According to reports, the settlement will include provision to allow stores to surcharge customers extra in an attempt to steer customers toward less expensive payments (although certain states laws prohibit the practice), will pay stores $6 billion and will lower interchange fees by the equivalent of 0.10% (10 basis points or $1 per $1,000 in sales) for 8 months valued at $1.2 billion with an additional $525 million paid to stores suing individually.

Stay tuned for more coverage on this settlement. But be careful. In the 2003 Visa and MasterCard settlement of a lawsuit by stores over the the "honor all cards" rules, $3 billion was paid out and many merchants gave up a third or more of their take to law firm solicitations. Just be patient. The details will come out on what if anything merchants need to do. In regards to the lower Interchange, as we continue to preach, move to a direct Interchange pass through service provider to take advantage of these savings (have we mentioned that's what we do?)

Visa Inc and MasterCard Inc are moving closer to a settlement in a seven-year old case named In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. Most analyst are predicting a settlement and possibly by the end of July. One of the possible settlement outcomes could be a reduction in interchange fees which is expected to have a negative impact on bank stocks. If your holding bank shares of major card issuers, be warned. If you are a small merchant, we will keep you posted here about what it means to you and anything you will need to do.

Visa posted positive double digit gains and says it will “live forever with less share than we once had” due to government regulations.

Visa reported “very vibrant transaction growth rates in U.S. (consumer) credit” and also noted that their commercial credit card side is growing at a good clip. As expected, debit volume declined as banks deemphasized debit and removed rewards programs associated with debit cards that once played an important role in driving volume.

Visa also said “the U.S. Department of Justice Antitrust Division issued a civil investigative demand requesting additional information about PIN-authenticated Visa Debit and elements of our new debit strategies, including the fixed acquirer fee.” Visa says it is confident their actions are appropriate.

As you know, Vantage provides the most transparent, direct pass-through of the payment industry’s universally established Interchange, Assessment and Access fee schedules.

This April, a whole new set of card fees are being introduced. Vantage reports on and tracks these industry fee changes as they occur on our web site and this resource is often use by reporters and market analyst as well as merchants, businesses and banks. We also post about the payments industry and card Interchange on our blog. In July 2011 we first alerted merchants to the Visa announcement to charge a new location fee.

Vantage passed through all the Fed regulated debit rates to our clients. We posted a Vantage Study Revealing the Results of Fed Regulated Debit in October. And while Vantage clients took advantage of the savings immediately, most Small Businesses are Missing Out on Debit Interchange Savings.

With these new fees, Visa is responding to government regulations that require all debit cards to have two unaffiliated network choices. Visa is lowering it’s per transaction access fee (Vantage is passing this savings on to our clients) and is instead implementing a fixed acquirer fee. Visa hopes to encourage merchants to route more transactions to Visa (a monthly fee divided by more transactions equals lower overall per transaction pricing), or so the story goes. This article in an industry trade journal discusses the reaction to these industry wide changes from the Electronic Transaction Association. Here you can listen to expert commentary on how card fee structures are changing in response to government regulations on debit.

Overall, if you accept lots of too-big-to-fail bank debit cards you should still come out ahead. If your customers don’t use debit cards, chalk these new fees up to more unintended consequences of government regulation.

Global Payments identifies and self-reports unauthorized access into a small portion of its processing system limited to track 2 card data only (no track 1 card data, no names, no social security numbers and no bank account information was compromised).

Global Payments reports incident does not involve our merchants or their relationships with their customers. Global Payments continues to provide uninterrupted processing services.

ATLANTA March 30, 2012 – Global Payments Inc. (NYSE: GPN), a leader in payment processing services, announced it identified and self-reported unauthorized access into a portion of its processing system. In early March 2012, the company determined card data may have been accessed. It immediately engaged external experts in information technology forensics and contacted federal law enforcement. The company promptly notified appropriate industry parties to allow them to minimize potential cardholder impact. The company is continuing its investigation into this matter.

“It is reassuring that our security processes detected an intrusion. It is crucial to understand that this incident does not involve our merchants or their relationships with their customers,” said Chairman and CEO Paul R. Garcia.

For more information please visit www.2012infosecurityupdate.com.

It’s what all merchants are looking for; who doesn't want the “best merchant rates”? The real question for merchants is how to go about achieving this while avoiding the pitfalls of selecting a poor service provider.

To be the best, can you just claim it or buy the best domain name? The Best Merchant Rates may be an SEO search term, but a company name? Isn't that like naming your company “the best cola” instead of Coke or Pepsi? Do you trust a financial services company with a generic company name like “Merchant Services” or do you go with brand names like Bank of America or Costco?

For small businesses looking for the best merchant rates, turning to mega-banks and mega-retailers is not their best choice. For example, Bank of America Merchant Services advertises heavily with an asterisk. Interestingly this same bank, until public pressure forced it to change course, wanted to charge customers $5 a month to use a debit card. The Ellen Show posted this hilarious message from Bank of America. It would be funny if it wasn’t true of the mega bank approach to payment services. And Bank of America has been running commercials touting its "cash rewards" credit card “offering no annual fee, a $50 sign-up bonus, then a 1 to 3 percent cash refund on your spending”. Mega banks are trying to steer your customers to pay with credit cards over debit cards with the result that merchants will end up paying more in Interchange fees when accepting card payments. Sounds like a conflict of interest to us. Alternatively, will you turn to a mega retailer, who fought for lower Interchange for themselves but oddly isn’t passing the regulated debit Interchange on to the small businesses it’s marketing to? Costco’s fine print for its “rate-as-low-as” offer is followed by an asterisk that reads in part: “Rates listed are for qualified transactions. Reward cards process at a higher rate. A monthly minimum charge applies when qualified transaction fees and per-item charges are less than $20 per month… Rates and fees may change without notice...” etc. with even more fine print terms and conditions.

Does your search turn to the internet? What keyword phrase do you enter into your favorite search engine? Are you searching for the “best” merchant account or perhaps the “best” merchant service? And how will you know the best when you see it? To complete this task you will likely begin to get offers and compare discount rates and fees. In a merchant account comparison, how do you choose the best merchant services vendor for your business? Do you make a decision solely on the best merchant rate quote or do you take other factors into consideration?

Here is our best practice recommendation for all merchants to consider when shopping for merchant services:

1. Insist on an Interchange pass through pricing model (keyword search: “merchant Interchange rate quote”).
2. Insist on a month-to-month term (keyword search “month to month merchant account”).
3. Insist on open platforms verses proprietary processing systems designed to lock you into not being able to easily move to another vendor. Many providers sell (or worse…lease) proprietary bankcard terminals that will only work if you continue to process with them. Others follow this same model with payment gateways that once integrated into your point of sale or ecommerce platform leave you with a single processing choice (and we all know what happens to prices when there are no competitive pressures and no other choices).

Once you identify service providers that meet this criteria you can then begin your comparison. Important note, please don’t trust the “marketing” proposal but instead read all the fine print for yourself before you sign any application!

With so many credit card processing companies in the market, and without adequate knowledge of the payment industry, it can be hard to decide which merchant services provider is the best for your business. If you are shopping, please read these testimonials and include Vantage Card Services in your RFP. Vantage provides a host of online resources and personal consultations to help small business. On MerchantRates.com you can get an instant Interchange rate quote and customize the proposal specifically for your business. There is a buyer’s guide with frequently asked questions as well as numerous resources to help you gain a better understanding of the industry’s Interchange schedules.

Please share your experiences and most effective shopping strategy with us here.

As we head into the start of a new year, now is a good time to review your card processing procedures. Many of the highest Interchange rates result from transactions that downgrade for preventable reasons. Please take a moment to review your card acceptance procedures and follow best practices as they are important in qualifying your transactions at the very lowest Interchange rates available.

Here are the most common issues:

• If you are accepting key entered transactions, the most common cause of downgrades is due to missing AVS (address verification service) which looks to match the cardholder’s zip code at the time of authorization. Best practice: always enter the zip code. Check with your staff and your system to make sure you are entering and passing the zip code with each non-swiped card transaction.
• Other reasons for transactions to downgrade to higher Interchange rates include a mismatch of Authorization and Settlement dollar amounts (except in certain industries where tips are allowed) and forced/offline transactions in which a previously obtained authorization code is key-entered to settle a transaction. Transactions also fail to qualify for the best Interchange rates when transactions are not settled in a timely manner (typically 1-3 days depending on your industry). Best practice: settle your batch every day and avoid obtaining pre-authorizations.
• Non travel and entertainment merchants accepting commercial cards (Business, Corporate, Purchasing cards) should upgrade to a Level 3 payment gateway or virtual terminal. Level 3 refers to passing line item detail of the invoice with the standard payment data. Best practice: don’t use a retail terminal to process commercial cards. Vantage specializes in B2B transaction processing. Please contact us with any questions and visit http://vantageb2b.com for more information.

For personal assistance, give us a call at 800-397-2380 for a free consultation.