Gun sellers, medical marijuana shops, pornography sites, bitcoin exchanges and mug-shot galleries share a common stigma many payments companies refuse to do business with them, whether or not they run afoul of the law.
Even when a business can prove it is legal, "in many cases, there may be a debate about whether a business is unethical," says Maria Sparagis, sales director for Montreal-based DirectPayNet, which specializes in establishing payment processing for high-risk businesses.
The question came up again this month when The New York Times published a scathing article about websites that post mug shots of people arrested for various alleged crimes, removing the photos in exchange for payments of $30 to $400. The article concluded with remarks from the major card networks and PayPal, which all vowed to discourage or sever ties with these sites. A MasterCard representative went so far as to call the sites "repugnant."
However, there can often be a legitimate reason to post mug shots online, Sparagis says.
"I have not dealt with these specific mug shot websites, but the publishing of mug shots is a legal service," Sparagis says. "Newspapers have published mug shots of those arrested in the past. So that becomes part of the question."
If the business is legal and meets the requirements of a payment network, then acquirers and banks have to determine their stance on the ethics of the business, she adds.
Even companies like DirectPayNet, which tries to support medium- to high-risk clients that process $50,000 or more a month, the balancing act is not always easy, Sparagis says.
"Guns are a hot topic and some are for it, some are not," Sparagis says. "Basically, it becomes a Republicans vs. Democrats type of debate."
Indeed, in the wake of a number of high-profile shooting incidents, licensed gun dealers found it difficult to find processors to work with them.
Some acquirers shun legal adult entertainment merchants on ethical grounds, whereas others see such companies as a clear opportunity, Sparagis adds.
"If PayPal or others shy away [from certain merchant types], there are some acquirers that would capitalize on that and charge premiums to take on those merchants," Sparagis suggests.
When an acquirer or ISO is contemplating a high-risk merchant, that merchant's credit history provides some key answers, she adds.
"Is the merchant responsible, and does he have a past processing history or actually had some success in the past?" Sparagis asks. "If that merchant has good credit and shows a good financial history, the business may be questionable, but it is legal."
Atlas Payment, a processor with a niche in accepting high-risk transactions, did not respond to inquiries for this story. But the merchant types Atlas pursues showcase a range of high-risk segments pharmaceuticals, nutraceuticals, adult products, multilevel marketing, business opportunities, electric cigarettes, debt service, horoscope and fortune-telling, firearms, online auctions, online dating, software downloads, telecommunications, time share advertising and travel services.
PayPal, which established itself in 1998 as an alternative payment system for merchants that did not accept credit cards, is much less permissive than it used to be. In its early years, PayPal supported Internet gambling sites, but eBay eliminated that practice when it purchased PayPal in 2002.
Today, PayPal is more careful about who it does business with. "Any merchants that are found to be engaging in illegal activities or scams are immediately shut off from PayPal," PayPal spokeswoman Jennifer Hakes says.
After PayPal was alerted about the business practices of mug shot sellers, "we conducted a thorough review and decided to discontinue support for sites that charge to remove mug shots," she says. "We feel this decision is in the best interest of the PayPal community."
MasterCard, however, leaves the decision up to each acquiring bank as to how they would handle transactions initiated through these businesses, says James Issokson, a MasterCard spokesman.
Nevertheless, "we felt it was prudent to raise this issue to our acquiring banks to review the sites in question," he says.
Visa Inc. is taking a similar stance. In an emailed statement, Visa says it works closely with law enforcement agencies to safeguard the integrity of the card brand and payment system, but "does not take a position with respect to lawful goods and services bought and sold by the people and the companies who use our payment network."
In the case of the mug shot sites, Visa says it is asking the "responsible acquirers to investigate the merchants' business practices" to ensure they are both legal and in compliance with Visa operating regulations.
American Express and Discover have severed ties with the mug shot sites, the Times reports.