After reading an article this morning, the author states that merchant’s are prohibited from asking for an ID to process a transaction. Sounding completely ridiculous, I decided to further investigate.

I stumbled on a Visa operating regulation that I was not aware of. “You cannot require an ID in order to complete a Credit transaction.” Furthermore, you cannot decline or refuse a transaction if your customer refuses to provide an ID.

Although Visa rules do not preclude merchants from asking for cardholder ID, merchants cannot make an ID a condition of acceptance. Therefore, merchants cannot refuse to complete a purchase transaction because a cardholder refuses to provide ID. Visa believes merchants should not ask for ID as part of their regular card acceptance procedures.

The author was completely wrong as far as MasterCard goes, who takes a different approach to the situation…

For unique transactions processed in a face-to-face environment (with the exception of truck stop transactions and card-read transactions where a non-signature CVM is used), request personal identification of the cardholder in the form of an unexpired, official government document. Compare the signature on the personal identification with the signature on the card.

American express is a little vague, but still states that the identity should be verified…

Verify that the customer is the Card-member. Cards are not transferable.

It’s actually hard for me to believe that Visa goes this far in trying to protect their cardholder’s convenience at the expense of their merchants being exposed to potential fraud. I strongly recommend checking the ID of every card holder. No regulation prevents a merchant from asking for an ID, and I can’t imagine a customer seriously refusing under any normal circumstance. Merchants are not allowed to ask for an ID on “PIN” debit transactions where a customer enters their PIN number into a pinpad. For signature debit, where the card is processed like a credit card, treat the transaction just like credit and ask for an ID.

If anyone would like to see the various card regulations, they can be found here:
Visa
MasterCard Chargeback Guide
AMEX

Discover’s site requires registration, and I was unable to register with the Discover numbers of the 4 merchant accounts that we have. If anyone has a copy of Discover operating regulations, I would love to see them.

I am starting a new category where I will answer relevant merchant account related questions on the blog. This will be in the format of a Dear MSP. If you have a question that you need answered, please feel free to ask as usual, just keep in mind it may end up being answered publicly if it is relevant to other business owners. As always, any personal information sent will remain strictly confidential.

I’ll try to answer these question in a weekly Dear MSP post.

Thanks
Jamie

Visa and MasterCard have long standing regulations preventing surcharging customers for using a credit card. Recently they have allowed discounting for cash purchases (wordsmithing somehow negates the meaning of surcharging???).

I see merchants on a daily basis surcharging for credit transactions, and while I see it more as an inconvenience, the government doesn’t see it the same way. Currently there are 10 states with laws against credit surcharging, California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Some of these states have very easy ways to report businesses that are illegally surcharging, creating a quick path to fines, bad publicity, and lawsuits.

Apart from state laws, all that an angry customer needs to do is call their card issuer and report the business. The issuer passes the message down to the business’s processor, who then tells the business to stop. If more complaints are received, fines are assessed ($10,000 – $20,000 for the first offense), and then the business is shut down and placed on the TMF list by the issuer. They are then prohibited from accepting credit cards by just about every processor in the world until they get off the list.

It’s true that many businesses get away with surcharging for a long time, but I urge any business owner to seriously consider the potential consequences from breaking the surcharging regulations. It may seem like a logical idea from a financial standpoint, but the repercussions can be quick and severe.

The merchant account industry is in turmoil right now relating to the PCI-DSS fees that just about everyone is currently experiencing. I would like to make an analysis of why we are all seeing these fees and how this whole situation came about.

Just to dispel any hopes that these might be going away soon, they’re not. If anything, PCI is going to get much stricter, as congress has openly stated that PCI-DSS is not nearly enough.

How did we get to this point?

The entire PCI-DSS concept materialized about 5 years ago when Visa created PCI and MasterCard created a program called SDP. By creating a security framework based on history, logic, and anticipated weaknesses, these programs were designed to be a model for safely storing and transmitting credit card data. Eventually the issuers joined together and created the PCI security council, which was supposed to be an envelope organization in charge of PCI standards. The idea was that it would be far easier for merchants to handle a single version of PCI, rather than Visa, MasterCard, Amex and Discover separately having their own standards. Over time, PCI-DSS gained an adoption time-line, and became much more organized. PCI covers general operating principals, but is primarily geared to network and data security, as the internet and broadband access have created unseen opportunity for thieves to remotely steal large amounts of credit card and sensitive data.

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Many times business and website owners want to store credit card numbers for later. This allows re-billing customers for recurring orders, and allows easier checkout for repeat customers on a website.

If a business decides they want to actually store credit card numbers, they are subjected to stricter PCI-DSS standards, and run a real risk of losing customer data just by the fact that they have it. Apart from PCI, it’s difficult to securely store credit card data as there is a multitude of technical aspects to doing it safely. If you lay it all out on paper, there is a huge amount of work, ongoing management, and liability in storing credit card numbers.

But, sometimes we still need to store credit card numbers, so how do we do it?

We simply let somebody else store it for us. If we outsource our credit card number storage to another party, we are no longer liable for that data. This is still your customer’s data, so your reputation is on the line, but not necessarily your wallet. What’s even better is that with some of today’s available services, outsourcing this can give us an easier method of re-billing our customer than if we could easily store credit cards.

Who can we store these with?

This is the easy part. Your payment gateway may have a customer storage mechanism, or customer vault. If it doesn’t, find one that does.

What this does is store your customer’s information and credit card number in the payment gateway’s secure database. If you need to charge your customer again, you simply reference their customer number and the amount you wish to charge. You can do this manually through the administrative virtual terminal of your payment gateway, or you can often do it directly through your website using an API. You can also setup recurring payments, refund, void, or credit via a customer’s stored card.

With a system like this, a developer can create a custom recurring billing system, or a user friendly “remember card” feature with your ecommerce site’s checkout system.

Which gateways support this?

The Network Merchants Gateway which we developed an integration module a few weeks ago, supports customer storage at a very low cost per month. Network Merchant’s customer storage is called the Customer Vault.

Authorize.net has a similar system called the Customer Information Manager.

There’s definitely a number of other gateways that have custom vault type systems as well. These can be integrated with a website, charged manually, or even integrated with a desktop application. A customer vault is a responsible way to outsource credit card number storage while still being able to use them.

We’ve just finished a PHP Integration class for the Network Merchants Payment Gateway.

This script integrates with the Network Merchants Direct Post API, and the Network Merchant customer vault API.

The Direct Post API allows processing credit cards and electronic checks. The Customer Vault allows merchants to store their customers credit card and check information in Network Merchant’s secure customer vault. The API allows charging customers stored in the vault without a merchant ever storing a credit card number.

View and download the class here »

We just finished creating a new tool. This tool generates a voided check for your business.

When a new business goes out to setup a merchant account, they will be asked for a voided check. Many processors will no longer accept temporary checks, so we developed this too to print a voided check until you get your real ones.

Generally a merchant can ask their bank for a letter of an accounts existence, but many banks are now refusing to do this, in an effort to force customers to process with them. Since it’s perfectly legal to print your own checks, here’s our response to this dilemma.

So, if you need a voided check, take a look at our Voided Check Generator.

Authnet suffered an outage this morning. Current rumors suggest that it was due to a fire at a data-center, which subsequently destroyed the backup generators from the sprinklers.

Authorize.net is currently the largest payment gateway in the world. This is affecting millions of websites right now. To my knowledge this is the first major outage since the DDOS attack they suffered several years ago.

A casualty of this magnitude has the ability to permanently damage / destroy this company’s trust and reputation.

PA-DSS, is a security standard set for payment application developers, outlining security and auditing procedures for electronic payment applications. Software that falls under the PA-DSS envelope could include anything from a POS system to online shopping cart software. PA-DSS requires that a program be audited by a 3rd party and pass a series of security test and adhere to best-practices before it can be distributed. If it is not audited or fails any part of the audit, it cannot be used as a payment application.

Phase V – July 1, 2010
Phase V mandates the use of payment applications that support PCI OSS compliance, requiring acquirers, merchants and agents to use only those payment applications that can be validated as PA-DSS compliant.

Put this into perspective. There are currently millions of websites using paid and open source software for their online stores. Software like Oscommerce, Zen Cart, Magento, and others have millions of users. There are only 2, online store software packages that are PA-DSS compliant. If there is not a mass-movement to get software PA-DSS compliant in the next year, almost every single online store will be out of compliance and subject to fines, or being shut down. This is only a small part of the problem. There’s still thousands of retail businesses using older payment software and the cost of upgrading would be in the millions, assuming it’s even possible.

As written by Evan Schuman
“Essentially, this standard could cause merchants of all sizes in all industries to have to switch payment application vendors.”

Where the real mess begins…

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The Merchant Account Search Engine has been updated. It’s been a while since I’ve added new sites. I just finished adding about 40 new blogs and informational websites.

As always, please send any recommendations of websites that should be included. Please keep in mind that blogs and websites will only be added if they’re mostly objective. Many of the merchant account blogs out there are only for self-promotional purposes, and these will not be included in the search engine.

Here’s a few of the sites that a currently in the engine…