How NOT to Lose Your Merchant or Gateway Account

Merchant Processing Survival Tips 2010
Merchant Processing Survival Tips 2010

If you haven’t read about the new “Brand Damaging” issues and you accept credit cards on your website… You need to. The potential impact on your business is too large to ignore.

Now that you have hopefully informed yourself, let’s concentrate on keeping you out of trouble and getting canceled.

The new rules may seem a bit daunting, but they are really pretty simple…. If it’s trickery, you cannot do it anymore. You may be sitting there thinking, “I have been running this “Free Money” website for 10 years…. This doesn’t apply to me. You are most certainly wrong. These are new rules, new implementations and new punishments for violations.

The cost for violating one of these rules and getting caught (and you will) is at it’s best cancellation of your merchant account or gateway account…. At it’s worst, very large fines and cancellation. Heed this warning, even if you haven’t received any communication from your Merchant services providers.

Merchant Processing Survival Tips 2010

Online marketing campaigns that employ any “Free-Trial”, “Deferred Billing” and/or “Shipping Only” are considered trial offers and are subject to the new rules. Consumers must receive a tangible good or contracted service in exchange for the credit card charge(s). Incentive type discount offers are acceptable ONLY when the cardholder is receiving goods or services in exchange for payment. Having said this, note for example that e-Online will no longer support

accounts engaging in hidden or delayed charges and ‘free’ offers that are not truly free.

  1. Avoid using  “free” or “risk free” language on your website and in marketing campaigns (including PPC) .. Unless it is 100% really free.
  2. If you use the “Pay Shipping & Handling Only” technique, then these charges must be fair, reasonable and fully disclosed. So if you have been slipping by on the $5 shipping and $20 handling fee, you must stop. Also note that inflating your actual shipping has additional implications as well… Did you know that most states expect you to pay sales tax on overcharged shipping fees?
  3. Trial offers need to be no less than 10 days and the trial period should not begin until product is shipped to the consumer or the service has begun. You are not permitted to offer trails with exemptions, filtering or special rules for age, weight, height, geographic location, race etc.
  4. Avoid creating a false sense of urgency because if the matter is not genuinely urgent you are in violation. For example if you have the “10 day only” message running on your website for 3 years now… You are in violation. These periods of offers must be genuine and accurate. e-Online has strictly forbid the use of  applications such as countdown clocks, tickers, or language such as “Offer Expires Today!”, for example already.
  5. By mandate of the FTC, product claims, promises, guarantees and research claims MUST be accurate and proper. This is pretty unlimited and includes testimonials, endorsements and even product reviews. Don’t think for one second that user supplied product reviews are exempt… It is your website right? Not only do you risk loss of merchant services with these issues, but the FTC can fine 11K on top of whatever the credit card companies may choose to fine you for your “Brand Damaging” behavior.
  6. How about the FTC’s new rules for pricing? Prices must be within reasonable “fair market value”. Any negative options must be clearly disclosed, and you cannot bill for any product or service that the shopper/consumer did not knowingly purchase… Including things like upgrades and software updates, for example.
  7. If you have a special offer which includes some shady marketing like exclusions or negative options you are required to have that customer agree to the terms twice before charging them.

The first validation can take place with the initial offer presentation prior to submission of credit card information, and the second during the checkout process. The confirmation order page must also require consumers to acknowledge that they agree to the Terms & Conditions and authorize the merchant to charge the credit card for the disclosed dollar amount. Terms must be displayed adjacent to the “submit”, “confirm” or any other “call to action” button confirming the order. The price must be within 100 pixels of the “submit”, “confirm” or any other “call to action” button.

  • Shipping and Handling should not be billed separate from charges for the product or service.
  • Terms must be in a minimum 12-point “easy to read” font.
  • Avoid visually distracting graphics from the display of terms.
  • Pre-checked boxes must never be used.
  • Consumers should be required to actively and individually select each offer or bonus during the checkout process when there are multiple offers or up sells presented. No offers or up sells should be pre–selected or pre-checked.
  • Consumers should not be able to move forward in the offer or checkout until the box acknowledging the terms is checked.
  • Verbiage must clearly disclose the enrollment into an ongoing membership with no distraction. An example of an acceptable disclosure is: “By clicking “Submit” you acknowledge that you understand you are being enrolled in a 10 day trial for $4.95, and after expiration of the 10 day trial period you will be charged $59 per month until you cancel your service”
  • All products or services purchased when the call-to-action button is clicked should be billed as a single charge unless the order is fulfilled at different times requiring multiple charges.


Merchants must not make it difficult for consumers to exercise the disclosed cancellation procedures and all cancellation requests must be honored in accordance with the stated terms of the transaction.

  1. Refund policies must be disclosed prior to the sale completion. Establish a clear, concise statement of your refund and credit policy. Your policy should be consistent with the objectives of your business and the products or services sold.
  2. Merchants must not require return of any trial offer product samples in order for the consumer to receive a refund, or cancel their ongoing subscription.
  3. “Full Money Back” or “Full Satisfaction” guarantees are considered false and prohibited unless the offer provides a full refund on all products, including but not limited to Shipping & Handling charges.
  4. Refunds should be for the full amount charged including shipping and handling
  5. All future billing to a customer should be canceled when a refund is issued.

All future billing to a customer should be canceled when a chargeback is received.


The FTC has published the regulations along with many resources online for businesses and consumers like yourself to learn and understand the new regulations.  A few helpful links provided by e-online are included below:

Commercial Practices Part 425, Use of Prenotification Negative Option Plans

Prenotification Negative Option Plans

Advertising and Marketing on the Internet

Dot Com Disclosures

Direct Response industry publications have provided articles with some clarification regarding these guidelines:

So, are you scared?

If you have been utilizing these techniques, then you probably should be. Realize that the allowable fines and penalties for violations of these rules can mean the death of many if not most small businesses. On the lighter side, even receiving the cancellation email from a merchant provider, allowing you a very short 2 weeks to make other arrangements for processing or gateway services is enough to put you in the poor house.

Take heed, learn and understand these practices, and when in doubt contact your merchant providers… speak with someone in underwriting and have them look at your website and marketing materials and provide you the correct way to market your products…. Before the axe falls.