There is a subtle shift afoot surrounding merchant fee disclosures. Both MasterCard and Visa have revised their Rules to require more transparency in card processing charges. Merchant acquirers and payment facilitators would be wise to revise their merchant agreement forms to incorporate the new guidance.
The MasterCard Rules now specify that acquirers and payment facilitators must deliver to merchants and sub-merchants a separate fee disclosure in the merchant contract. The disclosure must detail, in truthful, clear and simple terms, the methodology by which each merchant fee is calculated.
To give the industry insight on what will satisfy the new requirement, MasterCard has published a sample fee disclosure that will comply with the Rules. We are talking nitty-gritty detail here. MasterCard recommends that the following be included:
- Any monthly minimum fee
- Qualified rate (credit cards): X.X%
- Mid qualified rate: Qualified rate + X.X%
- Non-qualified rate: Qualified rate + X.X%
- MasterCard assessment fee: X.X%
- Penalty to cancel prior to expiry date
- Description of discount rate calculation
Further, MasterCard suggests including the following information on a distinct disclosure page, if not disclosed elsewhere in the agreement: the date of the contract, cancellation terms, the name and address of the acquirer, the name and address of service providers, the name and address of the terminal provider, and when the merchant will receive payment for transactions.
In addition, MasterCard now requires that card processors and payment facilitators provide a minimum of 30 days advance notice to the merchant of any fee increase or introduction of a new fee. This is treading new ground: rarely have the card brands mandated business terms in a contract with a merchant. As a best practice, MasterCard advises acquirers and payment facilitators to include terms within the merchant contract that permit the merchant to terminate its agreement without penalty within 90 days of receiving notice of a fee increase or introduction of a new fee.
Visa, too, has published new merchant fee guidelines. In May, 2015 Visa noted that the Visa Rules prohibit representing any fee created by an acquirer as a fee levied by Visa. The guidance explained that Visa charges are imposed on the acquirer, not on the merchant, and therefore that all fees should be described as a “Processing Fee for Visa Transaction” and not Visa fee. Acquirers and payment facilitators must review their solicitations, marketing material, agreements, notifications, and statements and develop corrective action plans by In September 1, 2015, with full compliance required by January 1, 2016.
We suggest that card processors analyze their existing merchant agreement forms, and revise the templates to incorporate the MasterCard and Visa mandates.
–Holli Targan, Partner, Jaffe, Raitt, Heuer & Weiss, P.C.