Willow....excellent.
Before everyone runs out and attempts to obtain their own merchant account for processing high risk adult transactions please consider the following.
First of all, credit card transactions processed for adult sites are (or should be) processed under Merchant Category Code 5967 which is a High Risk Adult Video Text transaction identifier. Failure to process under this specific code will most likely result in a large fine to the merchant.
Processing transactions under MCC code 5967 carries its own set of guidelines which differ from transactions processed under other MCC codes, such as for standard retail transactions. These
guidelines are primarily geared towards chargeback reduction. Specific thresholds have been set by each card association in order to monitor merchants and the number of chargebacks which they are generating.
Below are the current chargeback thresholds for high risk 5967 merchants
VISA
Overall 2.5%
CDC 1% (customer disputed chargebacks)
Foreign 2.5% - Calculated by number of foreign chargebacks/count of foreign sales in one month
*Note on Foreign - this ratio was decreased from 5% to 2.5% on Jan 1 2001, and this is the
the one parameter that typically causes high risk merchants the most problems/fines
Penalty - the penalty for exceeding the any of the above parameters is $100/chargeback in the first month you exceed any threshold. The penalty increases to $200/chargeback if a merchant continues to exceed any of the above thresholds.
MC
Overall 1.0% (yes that is one percent)
Penalty - the penalty is $25/chargeback initially increasing to $50/chargeback PLUS MC can
also fine a merchant on credits as if they were chargebacks if they feel that the
merchants credit percentages are to high.
If a merchant continues to exceed the above thresholds then they will most likely lose
their merchant account and receive a TMF (terminated merchant file), which is a very bad
thing, being given this status may prohibit the merchant from ever obtaining another
merchant account whether it be for adult transactions or for standard non-adult business.
And the rules are changing. Card associations are in the process of approving MANY additional
rules/guidelines which will effect high risk merchants. One of which is that they may not
allow any company who has previously received a TMF for a merchant account to process high
risk transactions, this includes processing with a 3rd party credit card processor! (Epoch,Ibill,CCbill etc..)
3rd party processors assume a lot of responsibility on behalf of your account. Both in terms of financial
risk and staying in compliance with rules set fourth by the card associations. At Epoch, as do others, we have an
extremely strong infrastructure with business processes which are geared specifically towards management
of our master account which is ultimately your account.
As far as scrubbing goes, yes we scrub and we do so for a specific reason...to stay in compliance with
chargeback thresholds which avoids fines and allows us the ability to continue to process on your behalf.
Remember we only make money when our clients make money, so having to "turn up the scrub"
in order to comply means less money for both of us.
There are so many benefits to processing with a 3rd party processor and once you add up all of the fees
of maintaining your own merchant account you will realize that the cost savings between your own
account vs. a 3rd party account is not significant if any.
Clay Andrews
http://www.epochsytems.com