Q&A with author Christine Speedy. This response is related to an excerpt from yesterdays enewsletter:

Subject: Business to business credit card rate reduction. Sending level 3 data can reduce interchange fees over 1%. Not all processors support level 3, and even if yours does, you may not qualify for them. Validate if you’re getting level 3 on your merchant statement with these examples:

• NONQUALIFIED: corp data rate 1, corp data rate 2, bus std, EIRF.
• BEST QUALIFIED: corp prd 3, EVPSCRPDATAR3, Commercial Data Rate 3

If not , it could be your processor, your price plan, your merchant account set up, or the terminal you’re using that is the cause. Contact your representative to find out which. Contact me if you want technology, not people, to manage how transactions qualify.
CenPOS has supported level 3 data for retail and key entered. NEW, CenPOS supports level 3 for customer initiated payments on our hosted pay pages, including electronic bill presentment and payment (EBPP). Call for help to take advantage of this service (no extra fee).

Customer Question: We have a customer who uses a level III card to pay multiple invoices at once. This charge is always relatively large, and we’ve noticed it’s categorized under the MasterCard section – “COML LARGE TICKET 2 FLEET”. Would you know what this category is, and if it is associated with level III at all?

Answer: Below is screenshot of  page 93 from the MasterCard U.S. and Interregional Interchange Rates and Criteria, effective as of October 2012. (That’s the most recent from  MasterCard.)

For the card presented, the interchange fees are the same for both large ticket sales. Large ticket 3 requires $100,000 sale minimum. The sale was between $25,000 an $99,999.99, thus the transaction qualified at the proper category. If the sale was $100,000 or more, then it would not be the lowest qualified interchange category. Since the rate is the same, there is no financial difference, however,  MasterCard could change the rates, so it’s important to always qualify for the right interchange bucket.

Below are highlights of a few credit card processing 2013 rules changes applicable to many 3D merchant blog readers. Please note, the information contained herein is limited and does not contain all the applicable details. Refer to the card brand rules for specific details or contact your merchant services provider.

CARDS ISSUED OUTSIDE US: Effective April 19, 2013, American Express increases Fee from 0% to 0.40% for Prepaid Cards. Effective April 1, 2013, MasterCard increased the Acquirer Program Support Fee from 0.55% to a new amount of 0.85%.
DISPUTES: Effective April 20, 2013, Visa will update International Operating Regulations with modified and new compelling evidence rules for the dispute resolution process.
Visa New Representment Right for Compelling Evidence
Related dispute reason codes: 30 – Services Not Provided or Merchandise Not Received; 53 – Not as Described or Defective Merchandise; 81 – Fraud Card Present; 83 – Fraud Card Not Present.
EXAMPLES:

• For a Mail/Phone Order transaction, a signed order form.
• For a card-not-present transaction, evidence that the transaction uses data, such as IP address, email address, physical address, and telephone number, that had been used in a previous, undisputed transaction. Evidence that the transaction was completed by a member of the cardholder’s household.
• For a transaction in which merchandise was delivered to a business address, evidence that the merchandise was delivered and that, at the time of delivery, the cardholder was an employee of the company at that address (e.g. confirmation that the cardholder was listed in the company directory or had an email address with the company’s domain name). A signature is not required as evidence of delivery.
• For a card-not-present transaction in which the merchandise is picked up at the merchant location, any of the following:Cardholder signature on the pick-up form. Copy of identification presented by the cardholder. Details of identification presented by the cardholder.

Effective October 19, 2013 Change to MasterCard return policy for reason code 60 – Credit Not Processed. If a merchant doesn’t accept buyer’s remorse returns and cancellations, special terms must be disclosed them at the time of the sale. Cardholders must be informed of the Refund Policy prior to completion of the sale at the point of interaction. Failure to disclose will result in the merchant requirement to accept the goods for return and issue a credit to the cardholders account.
Note: Special Terms would include but not be limited to; restocking fees or in-store credits.

Please refer to official documents for further information. Here’s a list of links to card brands.

Merchants Have New Representment Right for Multiple Fraud-Related Chargebacks

In 2011, MasterCard implemented the Fraud Notification Service (FNS) as a means of ensuring that chargebacks are properly submitted by the issuer.
Accounts that are deemed fraudulent must either be closed by the issuer or the chargeback rights must be relinquished for those accounts. This service also helps determine if a chargeback representment option is possible.

Effective April 19, 2013, MasterCard will expand their rules regarding excessive fraud chargebacks on a single MasterCard card account number and expiration date combination.
Prior to this change, if fraud-related chargebacks occurred on any one MasterCard card account (used at any merchant), the chargebacks could only be represented if the transaction occurred prior to the date of the second fraud-related chargeback (the FNS date). With this modification, if there are over 35 fraud-related chargebacks on any one MasterCard cardholder account (used at any merchant), merchants will have the right to represent the transaction to the issuer. This is a positive change to protect merchants from fraud.

Now 2013, some merchants are experiencing issues related to the revised MasterCard and Discover 2010 Prepaid and Debit Card Requirements, particularly partial auth reversals. One reason is that some transactions received a partial approval. A partial approval occurs when a Gift Card is used (Visa/MC/AMEX prepaid cards) that have a lower balance that the requested authorization amount;  the processor approves the transaction for the amount that is left on the card. The merchant then must collect the balance with an alternative payment source such as cash or another card.

The 3 critical points of the rules change (from MasterCard):

• Partial Approvals—Merchants can systemically conduct split-tender purchases by allowing debit card issuers (including prepaid) to systemically approve a portion of the original transaction amount in the authorization request when the transaction amount exceeds the funds available on the card. The merchant can then systemically initiate split-tender processing and obtain the remainder of the purchase amount in another form of payment.
• Balance Response—Prepaid issuers can transmit account balance information in an authorization response, cardholders will attempt fewer purchases that exceed their available balances, leading to fewer declines at the POS.
• Authorization Reversal—Authorization reversals will free up debit cardholders’ open to buy amounts by reducing issuer holds on available balances when transactions were not completed, therefore reducing the declines at the POS and the amount of cardholder complaints that are unpleasant for all parties involved.

At the time the rules were created, technology within various points of the payment processing ecosystem could not support the new requirement. Payment gateway and processor issues have largely been resolved at this point, but partial authorizations may still be troublesome in certain environments. For example, an ecommerce site or POS software solution may not have the logic to accept an alternate payment source. If you have an issue, the simplest immediate solution is to contact your credit cart processor and ask them to turn off partial authorizations on your merchant account.  That’s the quick fix, however, if the rules apply to your business, you may need to update your payment technology to comply. Refer to page 299 in the MasterCard Rules, updated December 2012, for more information on Full and Partial Approvals and Account Balance Responses.

About Christine Speedy, blog author. Christine is an authorized sales agent for CenPOS, a cloud payment processing suite of solutions that creates numerous efficiencies for merchants. The CenPOS point of sale, mobile app, and other solutions support partial authorizations and authorization reversals.  CenPOS Global Sales: Christine Speedy (954) 942-0483.

In November 2012, the United States District Court for the Eastern District of New York preliminarily approved a proposed settlement agreement in the In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. As part of the merchant class action settlement, beginning January 27, 2013, merchants in the United States and U.S. Territories will be permitted to impose a checkout fee on consumers when they use a credit card.

Key elements:

• Merchants who choose to surcharge must notify MasterCard,  notify Visa and notify their acquirer 30 days prior to beginning to surcharge.
• Brand Surcharges (Visa, MasterCard) cannot exceed the lesser of the maximum amount of 4% of the underlying transaction, or the average effective merchant discount rate**.
• Product Surcharges ( Rewards, Purchasing etc)  must not be more than the merchant’s cost to accept the particular credit product, minus the Durbin Amendment’s cap on debit interchange fees.
• Must be able to apply the same surcharge rules to competitive networks, where allowed by law
• DETAILS ARE IMPORTANT, including receipt requirements- Please read all the official rules, see links below.
• Debit transactions are protected under the Durbin Amendment of the Dodd-Frank Act, 2011 and may not be surcharged.

States With No Surcharge Laws*
California
Colorado
Connecticut
Florida
Kansas
Maine
Massachusetts
New York
Oklahoma
Texas

*Source: Visa.com 1/13/2013

** We assume that they mean the average effective credit card processing rate, not the average effective merchant discount rate, which is only the portion of fee over and above actual interchange fees paid.

Visa surcharge rules

MasterCard Surcharge Rules

Discover was not part of the litigation, and lifted it’s no surcharge rule in 2012. With all the rules above, if a merchant chooses to surcharge customers, they will need technology to ensure all the rules are complied with. CenPOS is a rules based payment processing network, including payment gateway,  that works with all major credit card processors. If interested in surcharging, please contact Christine Speedy.

About CenPOS “Creating efficiencies through payment innovation”
Founded in 2009, Miami-based CenPOS is a SaaS payment technology provider. CenPOS is an intelligent payment processing network that streamlines the payment experience for businesses and consumers by using state-of-the-art technology to replace inefficient, outdated payment systems. Global Sales: Christine Speedy (954) 942-0483.

Interchange updates are typically twice per year and the Fall release is now in effect. MasterCard debit and prepaid have shared the same interchange rates until now.  They’re now separated. Prepaid rates are up, as is their use by consumers. Prepaid card use rose by about 18 percent in 2011 as consumers dropped traditional banking products such as checking accounts with higher fees, according to a study by Pleasanton, California-based Javelin Strategy & Research, a market-research firm.

Pre-paid cards are costly for consumers to use and now they are getting more costly for merchants to accept. This is in response to lower regulated debit fees, which are capped at .05% and $.20 per transaction.

We maintain links to the most current interchange rates here.

TODAYS BULLETINS:

• Fraud costs
• Mobile Payments- as easy as Apple
• Historic $7.2 Billon dollar settlement may result in consumers paying swipe fees
• Interchange qualification question of the day: sales tax exempt and corporate cards

Retail Fraud Taking a Greater Financial Toll According to LexisNexis® 4th Annual True Cost of Fraud Study. This year’s cost of $2.70 per $1.00 in merchandise is up $0.40 from last year’s level of $2.30. One of the areas of major fraud growth is the mobile sector. This year, mobile merchants paid $2.83 for every $1.00 lost compared to just $2.00 for 2011, an increase of more than 40 percent. If you have losses due to fraud, call me to discuss prevention options.

One mobile payment solution that really stands out you may have seen in an APPLE STORE. I recently blogged about the Linea Pro hardware Apple uses. It’s more expensive than other options, but it also can help solve more problems. A recent client meeting uncovered a desire to collect donor information at special events for auction items. One option is to combine the Linea Pro hardware with CenPOS mobile; merchants can swipe the drivers license and collect just the name & address to append the payment file. If permitted by local law, full drivers license data can be swiped as well. For the Linea Pro, or any other mobile payment need, contact me for assistance to help choose the best solution for your needs.

Payment networks Visa and MasterCard, as well as a number of large retailers, agreed to a $7.25 billion settlement that may allow merchants to impose a “checkout fee” on consumers for credit card transactions and end a seven-year battle over credit card swipe fees.

• Read ABC News Article
• Visa Press release Visa, U.S. Retailers Resolve Claims in the Federal Multi-District Interchange Litigation
• National Association of State Procurement Officials Brief- 9/2012 (pdf download) if you do business with governments, read this.
• Expect announcements in the October Merchant update- until then, I recommend taking no action.
• Interchange qualification: corporate cards

INTERCHANGE QUESTION OF THE DAY: If a customer is tax exempt, how can the transaction qualify for lower interchange rates? If a customer is tax exempt, the merchant cannot qualify the business/purchasing card transaction with level 2 data for preferred corporate card rates, which requires a sales tax other than 0. Merchants rarely know what kind of card a customer has, and have no way of knowing what the rules are for that card. CenPOS solves this problem by identifying the card issuer in real time, and automatically prompting for the right extra data ONLY when needed. For example, when using alternative payment gateways or terminals, the merchant is usually stuck with 2.65% interchange rate. With CenPOS, a processor that supports level 3 data, and the CenPOS level 3 data prompt turned on, the merchant can qualify certain MasterCard transactions as low as 1.80%, a .85% savings. Look for CORP DATA RATE I (US) PUR, CORP DATA RATE I (US) BUS, EIRF or STD on your merchant statement for examples of transactions that may have been eligible for better rates.

Warm regards,
Christine  Speedy

Merchant statements for April 2012 may include a bulletin about fees. This is a bulletin from an actual statement.

EFFECTIVE WITH MAY 1, 2012, YOU WILL BE CHARGED DUES AND ASSESSMENT FEES WHICH SHALL BE CALCULATED AS FOLLOWS: 0.110% (MASTERCARD) APPLIED TO ALL SETTLED MASTERCARD CONSUMER AND COMMERCIAL CARD SALES BELOW $1,000 AS WELL AS PREPAID AND SIGNATURE DEBIT CARD SALES REGARDLESS OF THE TRANSACTION AMOUNT, 0.13% (MASTERCARD) APPLIED TO CONSUMER CREDIT AND COMMERCIAL CARD TRANSACTIONS EQUAL TO OR GREATER THAN $1,000, 0.110% (VISA) AND 0.105% (DISCOVER) MULTIPLIED BY YOUR GROSS SALES VOLUME. CONTINUING YOUR MERCHANT ACCOUNT WITH US OR USE OF YOUR MERCHANT ACCOUNT AFTER 30 DAYS WILL REPRESENT YOUR ACCEPTANCE TO THESE TERMS.

EFFECTIVE JUNE 1, 2012, YOUR MASTERCARD “US CROSS BORDER FEE” WILL BE INCREASED TO .40%.

EFFECTIVE JUNE 1, 2012, A .80% MASTERCARD “US CROSS BORDER FEE” WILL BE ADDED TO YOUR ACCOUNT. THIS FEE WILL BE APPLIED TO TRANSACTIONS IN WHICH THE CARD PRESENTED WAS ISSUED IN A COUNTRY OTHER THAN THE UNITED STATES.

All of the fees above are mandatory and non-negotiable. Merchants see these fees on their statements if they are on PASS THROUGH or INTERCHANGE PLUS pricing. We call this ‘wholesale’ pricing. This is the best price plan for merchants because costs are transparent. If the merchant does not have these fees itemized, then they are on a bundled price plan. The downside is that higher profits can be hidden in bundled pricing.

Note, cross border fees are fairly new, yet they are climbing rapidly. Some merchants are under the misconception that these fees do not apply to them with their particular merchant processor, however, if you read the fine print, you’ll find them everywhere. For example, Paypal charges a 1% cross border fee. Why the difference? Because it’s Paypal cross border, not card association specific ie Discover, Visa, MasterCard which each have their own rates. Paypal is a bundled price program. They can charge whatever they want.