The payments industry often relies on ISOs and agents to disseminate news to merchants, so why should the swipe-fee lawsuit settlement play out any differently?
Apparently, its not. Some of the recovery firms that register merchants to receive a share of the settlement money are relying on ISOs to provide merchants with information on the lawsuit.
The recovery people want ISOs to urge merchants to register to collect a share of the more than $7 billion the card brands and some big card issuers are offering to end a class-action anti-trust lawsuit over interchange fees. The plaintiffs, a group of 19 big retailers, say the fees have been too high.
Anyone who accepted Visa or MasterCard credit card payments between Jan. 1, 2004 and Nov. 28, 2012 is deemed a member of the class and thus qualifies for settlement money.
In return for persuading merchants to register to collect, ISOs would receive a cut of the fees the recovery firms collect from merchants for helping with registration. Together, the recovery firms and ISOs could collect a total of up to 30% of the merchants settlement when its paid, a recovery expert says.
Informing merchants of their rights also casts ISOs in a consultative role that strengthens relationships, observers say.
Its not too early to register even though the settlement is still making its way through the courts, says Scott Gallagher, senior vice president at Brownstone Recovery Group.
A Sept. 12 fairness hearing did not bring an end to the suit, he notes.
All the lawyers gathered around and class council for the plaintiffs said why the settlements good, Visa and MasterCard said why the settlements good, and a whole bunch of people went before the judge and said, I dont think its good for these reasons, Gallagher says.
Some merchants object to the settlement because it would take away their right to sue over interchange fees in the future. Others dislike a provision that allows merchants to publicize interchange fees to consumers.
Judge John Gleeson of the U.S. District Court for the Eastern District of New York could rule on the settlement any day, ending a legal process that has dragged on for seven years, Gallagher says.
When the judge hands down that decision, Brownstone wants to be ready.
Our philosophical approach is to educate the merchants, Gallagher says. We think that if they understand the court case and their options, thats a good thing.
Brownstone helps ISOs pitch the registration process by providing a library of communication material and a functional web toolbox that includes outbound call scripts, email drafts, marketing blasts, website content and progress reports on whether merchants are signing up.
We give the ISOs URL tools they can use to drive people to their website and then on to the Brownstone website, Gallagher says.
ISOs can adjust the registration fee to suit their clientele and markets, he notes.
We give them a high watermark of 30%, and they can go down from there, Gallagher says. The fee is split between the ISO and Brownstone. At a minimum, the merchant will get 70%.
So far, about 30 ISOs are working with his firm to register clients, Gallagher says. The ISOs range in size from having 200 merchants to 100,000 merchants, and the company remains open to taking on more ISOs.
Meanwhile some ISOs and processors are taking a different approach to registering ISOs for the settlement, says Adam Atlas, a Montreal-based attorney who specializes in the acquiring industry and serves as Brownstones compliance and privacy auditor.
Those acquirers are registering their merchants and charging a fee unless the merchants opt out of the process, an approach Atlas says he considers unfair.
A merchant should not forgo some amount of their settlement to a third-party service provider without agreeing to do so, he says. Some merchants might want to enroll themselves. Others might want to enroll with a provider that has different terms of service.
At least partly on Atlas advice, Brownstone has had an opt-in policy.
During the fairness hearing, Judge Gleeson said the opt-out policy falls into the What do you think youre doing? category.
As far as Im concerned, you cant tell people that youre going to file a claim on their behalf where they havent authorized you to just because you have this payment processing relationship, Gleeson said, according to a transcript of the hearing.