How Do Merchants Violate Visa and MasterCard Rules?

VISA and MasterCard Rules and RegulationsVISA and MasterCard Rules and Regulations

Many merchant violations of the VISA and MasterCard rules don’t even know they have committed a violation. Most stores don’t have any procedural information about how to process a credit card sale as part of their employee training other than hitting the “sale” button, and why should they? Are there any consequences?

I am continually shocked by the number of merchant violations of the Visa and MasterCard rules made by merchants I shop with on a daily basis.

Here are a few mistakes I’ve personally witnessed merchants make:

  1. Many cards say “Check ID” on the back instead of a signature, because many consumers feel that not signing the back of their card will make it harder for their signature to be forged. Merchants typically ignore the fact that the card says, “Not Valid Unless Signed.”
  2. There are no direct rules that keep a merchant from asking for a cardholders ID. A merchant cannot refuse to complete a purchase because a customer does not have valid ID. In most contracts that I have read between a merchant and their acquirer, merchants are required to follow specific Visa and MasterCard rules and procedures. The ones I have reviewed clearly state in the terms and conditions of the agreement that a merchant is prohibited from refusing a sale due to a customer not having a valid ID.
  3. I eat lunch at many places that say I must purchase a minimum amount to use my credit card.  It is actually in violation of the credit card companies’ terms and condition to refuse a transaction because it is below the “minimum”. Both MasterCard and Visa clearly state that a maximum or minimum transaction amount cannot be a requirement when accepting cards.
  4. You may have noticed gas stations charging a surcharge on credit card transactions. I often get calls from merchants asking to add a surcharge to offset the cost of taking credit cards. According to Visa’s card acceptance guide you many not charge a consumer a fee because they used a credit card. You can however offer them a discount for paying with cash or a gift card. There can also be convenience fees that can be charged to consumers who choose to place a telephone order or an internet order. This fee can’t be a percentage of the sale – it must be a flat amount, and it must be disclosed to the customer before it is assessed.
  5. Factoring is strictly prohibited by the card associations. You must process cards only for the type of business your merchant account is under. For example, I had an auto body shop that one day decided to fix abandoned cars. The merchant started to sell the cars in a lot they purchased next door. In this case the merchant should have opened a second merchant account. Their funds were held, and their account was almost shut off.

Merchants found in violation of Visa and MasterCard rules can be reported by completing a violation form with either the bank that issued the customer their card, or on Visa or MasterCard’s website. Merchants can be fined or shut down. Make sure you do research before you decide to create and post a store policy, so you can avoid getting reported for violating card association rules.

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