Merchant Account Underwriting Tools

Could you become a defendant along with your merchant?

As underwriters we are tasked with evaluating the risk of loss, whether caused by our merchant or by the consumer. In evaluating the service or product that we are standing behind financially, we want to consider if the merchant counted on “the inattention, unwarranted confidence, exuberance, and a desire for immediate gratification, which make them (consumers) less likely to see and read disclosures.”

Many consumers will initiate chargebacks claiming that they didn’t authorize the upsell or the recurring charge no matter how obvious the disclosure. Many merchants will intentionally obscure the terms of the transaction, also resulting in chargebacks.

In case you didn’t have time to follow the FDIC link in a prior post, scan this excerpt if you think the FDIC and FTC are not going to address a major consumer issue:

“FDIC Supervisory Insights
Types of High Risk Payments
Although many clients of payment processors are reputable merchants, an increasing number are not and should be considered “high risk.” These disreputable merchants use payment processors to charge consumers for questionable or fraudulent goods and services. Often a disreputable merchant will engage in high pressure and deceptive sales tactics, such as aggressive telemarketing or enticing and misleading pop-up advertisements on Web sites. For example, consumers should be cautious when Web sites offer “free” information and ask consumers to provide payment information to cover a small shipping and handling fee. In some instances and without proper disclosure, consumers who agreed to pay these fees, often found their bank accounts debited for more than the fee and enrolled in costly plans without their full understanding and consent. Still other disreputable merchants will use processors to initiate payments for the sale of products and services, including, but not limited to, unlawful Internet gambling and the illegal sale of tobacco products on the Internet.

Generally, high-risk transactions occur when the consumer does not have a familiarity with the merchant, or when the quality of the goods and services being sold is uncertain. Activities involving purchases made over the telephone or on the Internet tend to be riskier in that the consumer cannot fully examine or evaluate the product or service purchased. Similarly, the consumer may not be able to verify the identity or legitimacy of the person or organization making the sale.
Some merchant categories that have been associated with high-risk activity include, but are not limited to:

Ammunition Sales
Cable Box De-scramblers
Coin Dealers
Credit Card Schemes
Credit Repair Services
Dating Services
Debt Consolidation Scams
Drug Paraphernalia
Escort Services
Firearms Sales
Fireworks Sales
Get Rich Products
Government Grants
Home-Based Charities
Life-Time Guarantees
Life-Time Memberships
Lottery Sales
Mailing Lists/Personal Info
Money Transfer Networks
On-line Gambling
PayDay Loans
Pharmaceutical Sales
Ponzi Schemes
Pyramid-Type Sales
Racist Materials
Surveillance Equipment
Tobacco Sales
Travel Clubs”

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