Avoiding Unnecessary Regulation in High-Risk Verticals – By Heather Petersen

by Jenae Reid on October 17, 2017

Merchants who operate in the trial and continuity industry, as well as other high-risk verticals, have always been plagued by chargeback issues and reputational risks. But now more than ever, they face an increasing number of regulatory issues. FeedFront issue 40 cover

The reality is that there are certain merchants conducting shady business. These unsavory practices have resulted in unnecessary regulation and increased oversight, including recent FTC action taken on these merchants, and even their payment processors.

Examples of harmful practices that have attracted increased attention from the FTC include forced-continuity agreements, that are slipped into fine-print, or “free trials” that are set up using recurring auto-payment methods, either known or unknown to the consumer.

Additionally, “straw signers,” attempts to load balance, and adding “friendly” transactions post-approval are similar nefarious tactics that are drawing unwanted attention from the FTC these days.

The good news is that for the merchants and agents in this space who do it right, these industries have provided an incredible opportunity and a viable business model driving millions of transactions through their businesses and helping to stimulate the economy.

To protect the future of the high-risk vertical, merchants who sell products through trial and continuity need to evolve by regulating themselves before card brands or government agencies step in to do it for them.

Entities like the FTC are already prosecuting the most egregious offenders, and if this trend continues, we could see more unnecessary regulation on the industry as a whole. Given the track record of groups like the CFPB (Consumer Financial Protection Bureau), this will only lead to more impediments to business.

The simplest thing these merchants can do is provide basic transparency in offers, including return, billing, and cancellation policies – just like any other quality business. Operating in an open, professional manner will help trial and continuity merchants increase revenue and stay in business longer, while also improving the reputation of the industry as a whole.

The National Merchants Association believes in educating agents and merchants on card brand compliance and other rules and regulations because it’s the right thing to do – but also because it promotes longevity for merchants. It’s time that our industry comes together to find ways to support both merchant and agent success while also protecting consumers.

Processing for high risk merchants can be tough, but it can be done. As an advocate for this industry since the early 2000s, I know first-hand that these higher risk merchant verticals account for a significant part of the economy and offer products and services that consumers truly want.


Heather Petersen is the CEO and Founder of National Merchants Association.

This article appeared in issue 40 of FeedFront Magazine, which was published in October 2017. https://issuu.com/affiliatesummit/docs/feedfront-40

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