Welcome to our Fraud Alerts Blog

Visa has established a new fee called the Fixed Acquirer Network Fee (FANF), effective April 1, 2012.. This fee is in addition to all the other fees that are currently charged by Visa. The fee is charged in two parts.

1. Fixed Per Location Fee
The first part of the fee will be charged to merchants where the majority or all of their transactions are card present and the card is swiped through a terminal. The fee will be a flat monthly rate based on the number of locations and the type of business or the SIC/MCC code.

Number of           Mthly Fee                              Mthly Fee
Locations            Businesses listed below*       All Other business types
1-3                                      $2.90                                  $2.00
4-10                                    $4.00                                 $2.90
11-50                                   $5.00                                $4.00

*Applies to the following businesses:
3500Lodging, 5310 Discount Store, 5311 Department Store, 5411 Supermkt, 5511 Car dealer, 5532 Tire store, 5541 Service Station, 5651 Clothing Store, 5655 Sports store, 5712 Furniture 5732 Electronics Store, 5912 Drug Store, 5943 Stationery/Office Supply

2. Card Not Present Fee
The second part of the FANF fee will be charged to merchants that have Visa Card Not Present (CNP) transactions. This fee is based on the amount of the Visa sales that are not swiped through the terminal. If a merchant has more than one location with the same tax ID number, the fee will be charged on the total sales under the tax ID. This fee will vary from month to month depending on the Visa Card Not Present sales. Below is a partial list of the fee chart.

Mthly VISA CNP Sales Vol              Fee per month
< $50                                                     $2.00
$50-$199                                              $2.90
$200- $999                                          $5.00
$1000-$3,999                                      $7.00
$4,000-$7,999                                     $9.00
$8,000-$39,999                                  $15.00
$40,000-$199,999                              $45.00

Here is an example of how this will work:
Assume we have a merchant, John’s Pizzeria that has 1 location. He does primarily Card Present transactions but he sometimes takes orders over the phone and does not have the card to swipe. In the month of May, John’s location has $500 in VISA card NOT present transactions.
He would be charged as follows:

1.Fixed location Fee $2.00
2.Card Not Present Fee $5.00
Total FANF Fee for May  $7.00

Beginning in 2011, Credit Card Processors will be required to report all credit card payments to the IRS.  This information will be reported on a 1099-K form similar to the way interest and dividends are reported to taxpayers. The 1099-K form will list the merchant credit card payments by month for the year.  The 1099-K’s will be prepared at the end of 2011 and sent to the IRS with a copy to the merchant in the beginning of 2012.

This is the first year that the requirement is in effect.  Credit Card processing companies are currently gearing up for this new requirement by reviewing all the merchant accounts verifying that the Tax ID numbers are correct and that they match with the legal name that the merchant files their taxes under.

As a merchant, it is important that your processor has the correct tax ID number and filing name for your merchant credit card account because if there is a discrepancy, the Processing Company is required to withhold 28% and remit it to the IRS.  The merchant will then have to wait until they file their year-end income tax return to get this money back.  It will first be applied to any taxes due.

If you would like more information including a copy of the new 1099-K go to IRS.gov and search for 1099-K.

This post is about callers impersonating a merchant’s current credit card processor.

The most popular scam using this technique has been around for a long time but each year we still see some merchants fall for it.  It works like this:  Someone calls the merchant, pretending to be from the merchant’s credit card processor and asks if they need supplies for the credit card terminal.  They target merchants that have a large number of transactions and hope that they will speak to someone who is not familiar with the real processor.  If the merchant does need supplies, the impersonator asks for the type of terminal and the address of where they should send the supplies. 

Within a few days, the merchant receives the supplies, accompanied by an invoice for an inflated price, sometimes 10 times what the supplies are worth.  

 Another version of this scam is where someone calls pretending to be the merchant’s credit card processor and informs the merchant that they need to do an update to the terminal.   What they are really doing is reprogramming the terminal and results in the merchant processing through a different credit processing company.  The merchant does not see any difference in processing the daily credit cards but when they get their monthly statement, it is from a different processor with higher fees.

 Both of these scams rely on the merchant not being familiar with the current processor and the terms of their agreement.  These scams can easily be avoided with a few procedures in place.  First, employees should be aware of the name of the current credit card processing company and the name of the representative.  Next, only certain people should be authorized by the owner to order supplies or make any changes to the credit card system.  The merchant should also be familiar with the terms of their current agreement.  For example, our company does not charge for supplies and never randomly calls merchants asking about supplies so we tell our merchants to call us if they get any communications by phone, or mail regarding the credit card system.

As a merchant that accepts credit card payments, you know that the safest credit card transactions are the ones where the customer comes into a store and presents his/her credit card to be swiped through a terminal and signs a receipt.  This discussion is about those sales that are made over the phone or the Internet where the customer is not able to present the card.

These sales are a fraud risk because you can take an order and even though you get an approval on the card you still run the risk of getting a chargeback. There is no guarantee or proof that the person placing the order is the real cardholder.  Although there is no foolproof way to avoid a chargeback, there are some things you can do to reduce the risk.

 If you are a restaurant or business where customers typically come into your establishment, don’t take large credit card orders over the phone.  Unless you know the individual, have a policy where the card holder has to present the card in person. 

  If you are a phone or mail order business, make sure you get additional information from the customer including, the security code on the card, address and phone numbers.  Verify that there is a match on the address that you are given by the customer and the address read by the terminal. If it is a business that is placing the order, check the website for the company, their business address and the phone numbers that you are given to determine if they are legitimate.

 If you accept credit cards over the Internet make sure you use a secure gateway.  Secure gateways should have specialized software built in to alert you to potential fraudulent or questionable cards.  Your gateway provider can tell you what their software checks for. 

 Use your common sense when taking orders.  Do not accept orders received by email. Do not accept orders from foreign countries unless you know the customer and regularly do business with them.

One scam that we have heard of is someone placing a small order with a merchant.  The merchant fulfills the order and gets an approval on the card.  The customer then places a larger order within a week later.  The merchant feels comfortable that they got an approval on the first card and processes the larger order.  Then, a few days later, the card is reported stolen but the merchandise is already shipped and the merchant gets the chargeback.

 In summary, your best defense against fraud is to question all orders that are out of the ordinary for any reason and verify as much information as you can about the cardholder.

As of July 2010 there is a new set of guidelines that require all merchants who accept credit cards to be PCI compliant.  This compliance must be completed on an annual basis if the merchant uses a stand along terminal or quarterly if they process sales over the internet. 

 A few important bits of information about PCI that every merchant should know are:

 -It is now mandatory that you are compliant.  If you are not sure if you are compliant, call your processor.  Logical Processing’s customers can go to the PCI section of our website and click on the ControlScan link to verify your status.  If your company is not compliant, and there is a breach of card data you can be subject to fines by the card companies.

 -There is no standard charge for PCI.  While Logical Processing does not charge for PCI, many companies charge an annual fee that can be as high as $120 per year.  Many processors also charge additional fees for each month you are not compliant.  These fees are charged even if there is no breach.

 -Beware of companies sending you letters stating that you are not compliant.  Only your processing company knows your compliance status and those letters are just a scam to scare you.

 For more information on PCI requirements you can go to the PCI section on our website or call us at 800-373-7298.

Our first tip is how to handle all those credit card sales people that promise they can save you money on your credit card fees.  Since the fee schedules are not consistent among processors we have the following tips that should help in comparing fees and determining who has the best offer.

 First, tell the salesperson, before you discuss anything you want to see the contract you will be signing with all the fees listed. Most companies will not have a problem with this.  Once you have the contract you can verify all the fees they have quoted and you can also read through it to determine how long the term is and if there is any cancellation fee if you decide to change companies.

 Second, don’t get hung up on the discount rate.  Some companies will quote a very low discount rate and not mention all the other fees that they charge.  Depending on your average ticket, a lower discount rate will not make up for additional fees and your total cost may be even higher. Review all the other charges listed and make sure you understand what the various fees are for.

 Third, get the facts on equipment.  Many processors have merchants sign multi-year leases for equipment that could have been purchased for a fraction of what they will be paying.  Also find out if there are any costs for repairs and supplies for the terminal. 

Fourth, find out who will be servicing your account.  Most companies will have a 24/7 help desk for most terminal issues but you need to know who to call if you need supplies or if you have a question about your statement and if there is a local representative.

 Once you have all this information, take your last credit card statement and compute what your fees would be with the proposal you are looking at. 

At Logical Processing Solutions, we structure our pricing as clear as possible with no hidden fees so there are no surprises when our customers receive their statements.  If you are interested in getting a price quote you can call 800-373-7298 or submit your information on our contact page.