”

On February 28, 2008 without warning Paypal “closed” my account with $5,772.91 dollars in it. They say on the website and in several calls I made to them that they will not release the money due to a routine credit scan they made and didn’t like what they read in my equifax credit report.

What closed means by their definition is I can’t take the money out and I earn no interest on the money for 6 months. Almost 2 months have gone by since this happened and this is still the situation. They say when I signed up for Paypal I signed a standard agreement that says they can freeze the money in my account any time they want to. I strongly suspect they are earning interest on the money and, in effect, this is a scam on their part to make millions of dollars. I have 100% positive feedback as a seller on eBay (which owns paypal) and I’ve sold over 100 items. I have a feedback score of 86 with many of these being repeat business that doesn’t cause the feedback number to increase. The money was frozen from an auction in which all the winning bidders gave me positive feedback except for one non-paying bidder in Italy who never sent the money despite repeated emails so, of course, I never sent him the item. (The amount of the non-paying bidder is $500.00 — but since he never sent any money by Paypal or any other means I fail to see how this could play a roll in the “closed” account).

Periodic non-paying bidders are, unfortunately, a fact of life on eBay — fortunately a rare one in my experience. The other eight winning auctions of the “freeze” auction all gave me not just positive but glowing feedbacks saying they both received the items I sent them and were extremely happy with them. Without the money from PayPal there is a very good chance I will lose my family home as well as my mother’s home we are attempting to bring up to code. I, my wife, and two sons have lived in our family home for around 18 years. My mother, before she was institutionalized lived in her house (with my father, me and my sister in the earlier days) for around 50 years. We were planning on renting out my mother’s house to help pay for the expenses of her staying at Alzheimer Gated communities which charge $3,500.00 a month and more.

Ironically, before this happened, I was a big fan of Paypal.. “

Legal Commentary

“This consumer-merchant trade-off provides plenty of economic justification for retailers to offer and even to promote gift card sales because retailers stand to derive several economic benefits from such sales. Benefits from gift cards can include increased sales, marketing opportunities, improved cash flow and inventory management and a stronger bottom line as the result of unredeemed gift cards. ”

My Gift Card programs start at just $299 with just $12.95/month service fee and no transaction fee.  Call 612.229.8808 for more information

Is PCI DSS new?
No. The framework of the PCI data security standards has existed in different forms for some time now and continues to evolve. You may be more familiar with the payment brands’ programs that promote the adoption of the PCI DSS
• MasterCard: Site Data Protection (SDP) program
o Mastercard.com/sdp
• Visa: Cardholder Information Security Program (CISP)
o Visa.com/cisp
• Discover Network: Discover Information Security & Compliance (DISC)
o Discovernetwork.com/fraudsecurity/disc.html
• American Express: Data Security Operating Policy
o AmericanExpress.com/datasecurity

I only process a few hundred dollars a month. Does my merchant account still need to be PCI compliant?
Yes, all merchants, whether small or large, are required to be PCI compliant. The payment brands have collectively mandated PCI DSS compliance for any and all organizations that process, store or transmit payment cardholder data. Inherent in having a merchant account is the ability to handle cardholder data.

I already use a “PCI compliant” terminal/gateway. Doesn’t that mean I am PCI compliant?
No. Use of a PCI compliant payment application is one aspect of the many PCI DSS requirements, which cover handling of sensitive data. Currently, the PCI DSS lists twelve requirements. These requirements are organized around the following principles:
• Build and maintain a secure network
• Protect cardholder data
• Maintain a vulnerability management program
• Implement strong access control measures
• Regularly monitor and test networks
• Maintain an information security policy

Can I choose not to certify for PCI compliance?
If you choose not to complete the self-assessment questionnaire (and applicable network scans) you may overlook certain data security practices that minimize your risk of a security breach. In the event that your business is compromised, you may be subject to substantial fines per payment brand. These fines would be in addition to the expenses and fraudulent transactions resulting from the breach.
In light of the importance that data security has to the payment processing industry and consumers at large, we, as your service provider, may also begin imposing a fee for each month that your account has not been validated as PCI compliant or in any given month your account is deemed non-compliant. Failure to validate compliance may result in the termination of your merchant account.

Please contact Fred Erickson at fred@merchantaccountstandard.com for answers to other questions you may have.

• If you are looking to establish a web-based storefront, our payment processing is fully integrated with a number of online store building partners. Once you’ve completed your storefront, you can apply online for an ecommerce merchant application through Higher Standards, Inc.
• If you are a retail merchant with card-not-present transactions and do not want an integrated solution you can apply for payment processing using the Orbital Virtual Terminal, the quickest and easiest way to process card not present orders.
• If you are an existing e-retailer and already have a storefront we can easily replace your current payment processing services.

Fred Erickson

fred@merchantaccountstandard.com

www.merchantaccountstandard.com

Higher Standards, Inc

Voice:  612.229.8808

eFax: 1.888.657.8529

Our solutions don’t stop with our in-house capabilities. We partner with some of the most creative innovators in our field through our active partnership programs. Through Chase Paymentech’s partnership network, our customers benefit from learning about emerging trends and new opportunities first. Partners that provide truly unique services that can help our customers grow. And Chase Paymentech takes an active role on the boards of the card associations through our committee membership and ongoing program enhancements.

No other payment processor can deliver the commitment to service, breadth of products, performance of systems and overall value to the customer that Chase Paymentech Solutions does.

What products and services does Chase Paymentech offer me?
We provide comprehensive electronic payment solutions that meet virtually any business need, no matter what payment type you wish to accept or in which business environment you operate (e-commerce, lodging, restaurant, retail, direct response or petroleum). Our global processing network and breadth of processing services are the most comprehensive in the industry.

Providing dependable customer service is always our first priority. This means developing products and services that you tell us will help you - conquer new markets, provide faster customer service and give more options to your customer. From our powerful internet payment gateway to our flexible POS terminal options, our goal is to help you grow your business. When it comes to choosing a partner to power your payments, let Chase Paymentech deliver it all.

Our broad range of solutions includes:

• Turn-key Internet payment access and virtual terminal tools
• Full-service stored value card program, including gift cards and electronic gift certificates
• Comprehensive fraud detection service
• Web-based reporting and data management
• Recurring payment programs
• Processing of a wide variety of payment types including international currencies and electronic checks
• Experienced chargeback management to keep your losses to a minimum
• Customer service and account management
• 24-hour technical support, terminal deployment, training, replacement and repair

  Fred Erickson

fred@merchantaccountstandard.com

www.merchantaccountstandard.com

Higher Standards, Inc

Voice:  612.229.8808

eFax: 1.888.657.8529

What does it take to:

• Buy specialty spices from India to expand the inventory at your independent convenience store?

• Accept floral orders from customers across the continent and know you will get paid?

• Automatically pay your rent, water and garbage bill on time while dancing the night away aboard

your first Mediterranean cruise?

It takes Visa: The Currency of Life and the company that connects thousands of financial institutions,

millions of businesses and millions of cardholders to make these experiences possible. And it takes

interchange: the transfer rate exchanged between the merchant’s financial institution and the cardholder’s

financial institution every time a Visa payment product is used.

Interchange provides the incentives necessary to assure that financial institutions invest in the Visa

system and the benefits that we all enjoy with payment products – from protection against fraud to car

rental insurance coverage to airline miles to 24/7 customer service. Visa also uses interchange as a tool

to aid financial institutions in signing up more and more merchants to accept Visa so that you can fuel up

at the gas station, buy stamps at the post office and pick up a 50th anniversary gift for your parents in the

same afternoon – all without carrying a checkbook or fumbling for cash.

Understanding a Visa Transaction

Visa is one of the world’s best ways to pay and be paid, with acceptance in more than 170 countries

around the world. And while swiping your card in a store or entering your number online is easy and fast,

there is a lot more happening behind the scenes.

A typical Visa transaction actually involves four distinct players:

• A merchant is the store, restaurant, online retailer, hotel, airline or other entity that accepts Visa

as payment.

• An acquirer is a financial institution that signs up merchants to accept Visa payments and makes

sure those merchants get paid for those transactions as a result.

• An issuer is a financial institution that provides consumers with Visa-branded cards or other Visabranded

products. When a Visa credit card is used, the issuer actually “lends” the consumer the

funds to make the transaction.

• A cardholder is the consumer who chooses to use their Visa card or other Visa-branded

payment product to make purchases.

Visa Inc. All Rights Reserved

When a cardholder uses a Visa card to pay, the cardholder, merchant, acquirer and issuer all play a role.

For example, a cardholder uses a Visa card to buy a pair of shoes. It’s actually the merchant’s bank, or

the acquirer, that reimburses the merchant for the pair of shoes. The cardholder’s bank, or issuer, then

reimburses the acquirer, usually within 24 to 48 hours. And finally, the issuer collects from the cardholder,

whether through funds from the cardholder’s bank account if a debit card is used, through billing if a credit

card is used or from a prepaid account if a gift card is used.

The system works because all participants get value from the transaction, whether it’s convenience,

worldwide acceptance, a more secure way to pay, stronger customer loyalty or business efficiencies,

among others.

The Economics of Participating in the Visa System

Like every other business, participants choose with whom to do business and at a price commensurate

with the value they receive. There is a cost to participating in the Visa system and accepting Visa

products. And each participant’s decision depends on a range of factors:

• Merchants: Merchants negotiate the Merchant Discount or Merchant Service fee they pay to

their financial institution. The Merchant Discount may include a number of costs, including

interchange; the cost of transaction processing, terminal rental and customer service; and their

financial institution’s or processor’s margin. Merchants may change financial institutions in search

of a better Merchant Discount rate or broader services.

• Financial Institutions: Merchants’ and cardholders’ financial institutions pay certain fees to Visa

to participate in the system. Visa uses these revenues to maintain Visa’s global payments

network, strengthen the Visa brand through a range of marketing and promotional activities,

support the development of new Visa products and processing services, and make other

investments in expanding Visa’s business.

Additional value is exchanged between merchants’ and cardholders’ financial institutions through

interchange. Visa establishes this transfer rate level of interchange. Among other things,

interchange helps fund the various cardholder benefits and innovations that consumers have

come to expect. As a result, interchange ensures that both merchants’ and cardholders’ financial

institutions are able to attract new customers, expanding participation in the Visa network to the

benefit of all parties.

• Cardholders: Cardholders may pay certain fees to their financial institution, which may vary by

the type of account or be based on other features and services provided by the financial

institution to its cardholders.

Visa Inc. All Rights Reserved

Visa’s Position on Interchange

Interchange plays a critical role in nearly every Visa transaction and the system at large. And it is also an

issue that has been debated in courtrooms and regulatory arenas from time to time. Currently, retail trade

associations in some parts of the world are lobbying to establish price controls on interchange, either

through regulation or litigation.

Visa believes that any inappropriate intervention into interchange, if successful, would result in fewer

payment choices and a reduction in benefits for both consumers and merchants, and possibly even

higher check-out costs. While we respect any business’s right to lower its costs, we continue to believe

that interchange is the most effective mechanism for managing a global network that includes thousands

of financial institutions, millions of merchants and millions of cardholders.

Merchants have options when it comes to the payments they accept. They can also provide discounts to

those who pay with cash or PIN debit, choose to accept only cash or checks, or shop around for the

best prices.

Facts About Interchange

• Interchange is set in a highly competitive and dynamic environment.

• There is a cost to accept Visa cards, just as there is a cost to accept cash, checks and other

forms of payment. For example, it takes time to count and deposit cash, and cash may

disappear as a result of errors or theft. Checks can be delinquent or cause losses to merchants

because of a lack of funds in the check writer’s account. The cost to accept electronic

payments may be more apparent to merchants, however, because they are directly billed for

the service.

• Interchange is consistently monitored and adjusted — sometimes increased and sometimes

decreased — in order to assure the economics and value of the transaction are balanced for all

parties. Such adjustments enable Visa to expand the types of payments consumers can make

with their cards, including payments for small-ticket items, rent, utilities and even mass transit.

• Merchants do not pay interchange. They pay what is known as a Merchant Discount or

Merchant Service fee, which is negotiated with their financial institution and may include

interchange; the cost of transaction processing, terminal rental and customer service; and their

financial institution’s or processor’s margin, among other costs. So imposing price caps on

interchange would not necessarily lower a merchant’s costs for card processing.

• Visa sets interchange in a manner that balances the value and economics among all parties

that participate in the Visa network — merchants, financial institutions and cardholders. If

interchange is too low, then cardholders’ financial institutions won’t issue cards; if interchange

is too high, merchants won’t accept them.

• Merchants have options when it comes to the payment options they offer. They can provide

discounts to those who pay with cash or PIN debit, choose to accept only cash or checks, or

shop around for the best prices.

Visa Inc. All Rights Reserved

Frequently Asked Questions

How does Visa set interchange?

Interchange is set in response to dynamic and highly competitive market forces and strikes the right

economic balance between participants in the payment network. Among other things, it varies by the

type of merchant, cost of the sale, payment product type, processing technology the merchant uses

and region or country. For example, transactions at fuel merchants, quick service restaurants and car

rental agencies each possess unique attributes that require different interchange categories and

processing strategies. Similarly, the type of payment product used (e.g., credit or debit) and how that

product is used (e.g., face-to-face or over the Internet) affect the interchange rate and processing

requirements.

Who pays interchange?

The merchant’s financial institution generally pays interchange. Merchants make a payment to their

financial institution for Visa transactions, frequently referred to as a Merchant Discount or Merchant

Service fee. This is a market-based fee set by each merchant’s financial institution operating in a

competitive marketplace — merchants can choose their financial institution in the same way

cardholders can choose the financial institution that issues their Visa card. Interchange is only one

component of this cost of doing business.

How much is interchange?

Among other things, interchange varies by the type of merchant, cost of the sale, payment product

type, processing technology the merchant uses and region or country. For example, transactions at

fuel merchants, quick service restaurants and car rental agencies each possess unique attributes that

require different interchange categories and processing strategies. Similarly, the type of payment

product used (e.g., credit or debit) and how that product is used (e.g., face-to-face or over the

Internet) affect the interchange rate and processing requirements.

Can merchants negotiate interchange rates?

Merchants do not pay interchange directly. They pay a Merchant Discount or Merchant Service fee

that they can actively negotiate directly with their financial institution. Interchange is a mechanism that

helps manage a worldwide system made up of thousands of financial institutions, millions of

merchants and millions of consumers.

Are you being sued over interchange?

Yes. In some countries, such as the United States and New Zealand, merchants have chosen to

attempt to negotiate their cost of accepting cards through litigation.

Are interchange rates regulated?

In some countries, price controls have been imposed on interchange. Such regulation has only

proved to harm consumers. In Australia, where interchange levels are regulated, merchants have

increased their profits, while consumers have lost card benefits and choice. Consumers are also

paying higher prices due to the check-out fees merchants can now charge.

How much revenue does Visa gain from interchange?

Interchange is the transfer rate paid by the merchant’s financial institution to the cardholder’s financial

institution for the vast majority of transactions. For ATM transactions, interchange flows in the

opposite direction, from the cardholder’s bank to the acquiring bank. It is part of financial institutions’

cost structure.

 Visa Inc. All Rights Reserved 

Fred Erickson

fred@merchantaccountstandard.com

www.merchantaccountstandard.com

Higher Standards, Inc

Voice:  612.229.8808

eFax: 1.888.657.8529

Great question, most merchants we talk to find it very difficult to identify total rates and fees they  currently pay to process MasterCard, Visa, Debit and Gift Card transactions.  Have you experienced similar frustration?  Do you know what yours are?  Rates and fees are very much dependant on what type of cards your customers use.   Visa and MasterCard have more than 180 different card types, each with its own rules and costs that contribute to the rate you pay.  How you process a transaction also effects your payment processing costs.   These rules and costs are known as “Interchange.  Interchange is the wholesale cost of goods and is exactly the same for all processors.  Read more about interchange.

 Fred Erickson

fred@merchantaccountstandard.com

www.merchantaccountstandard.com

Higher Standards, Inc

Voice:  612.229.8808

eFax: 1.888.657.8529