Setting The Record Straight on PayFacs


Payment Facilitators (commonly known as PayFacs or PFs) have risen in popularity over the recent years. Within the ARM industry, PayFac models can provide an especially significant benefit – these models can be used to enable full compliance for convenience fee solutions, in order to protect collection agencies from non-compliance risks including lawsuits, account cancellations, and significant fines. 

However, PayFac models have been misused by processors engaging in dishonest practices, leading to serious consequences for merchants, as well as false misconceptions on how PayFacs can and should be used. In this article, we will break down what a PayFac model is, how PayFacs can help collection agencies stay compliant, and what to look out for when assessing a processor’s PayFac model.

What are PayFacs?

PayFacs are models where the service provider (e.g. Payscout) acts as the Main Merchant (also known as the Merchant of Record) and can board numerous merchants under this “master  account.” In other words, instead of setting up merchants to process payments with their own unique accounts, a PayFac is like an aggregator, where the Main Merchant can bring on many merchants under this umbrella. 

When should PayFac models be used to support ARM merchants?

Payscout utilizes a PayFac type model to implement our Convenience Fee solution for ARM merchants enabling us to fully adhere to the federal Fair Debt Collection Practices Act (FDCPA). According to the FDCPA, collection agencies may not “collect any interest, fee, charge, or expense incidental to the principal obligation unless it was authorized by the original debt agreement or is otherwise permitted by law”. The Convenience Fee is recorded by Payscout and the funds for the fee portion are deposited into our account. Therefore, we are able to allow for the necessary separation between collection agencies and any fees charged, as required by the FDCPA. 

In addition to protecting our merchants under collection law, our Convenience Fee solution has built-in RegTech technology to ensure full compliance with varying state legislation, and also follows all of the Card Brand Rules closely. For instance, we utilize split funding in order to meet Visa’s requirement that the Convenience Fee is charged as a single transaction and is not collected separately. This allows us to offer the only Convenience Fee solution available to the ARM industry that fully complies with Card Brand Rules, State Law, and the FDCPA.

How have PayFac models been abused? 

When used compliantly, PayFac models have the potential to actually increase your compliance, as demonstrated in the example above. However, some new processors intentionally abuse this model through non-compliant practices, so it is important to have a clear understanding of how the model can and should be used in order to help you identify dishonest practices used by processors. 

PayFacs were designed to specialize in a particular business type, and the merchants that are brought on typically need to be of an approved business type by the Sponsor Bank. There are very specific rules in this dynamic regarding what type of merchants you can and cannot board and collection agencies have always been prohibited. However, some processors abuse this model by intentionally misclassifying a merchant’s business type so that they can try and get away with boarding an unauthorized merchant type. When the Sponsor Bank or the Card Brands conduct an audit and this is discovered, the violation can result in a strong risk of the processor being shut down by the bank, which is why it is critical to select a processor that abides by compliant practices.  

What should I look out for when assessing a PayFac model or the right provider?

  1. Stability
    Payscout’s team has served the ARM industry for almost 20 years and has developed a deep knowledge and understanding of the needs of collection agencies.Payscout only provides services for established reputable collection agencies which allows agencies to enjoy a stable platform without the risk of interruption in service.
  2. Redundancy
    Sponsor banks can change their philosophy or adjust their risk appetite, but Payscout’s strong acquiring relationships and redundancy allows for payment processing continuity.
  3. Compliance
    Payscout’s RegTech products such as 360 Fee-Free Payment suite satisfies all the requirements of Card Brand Rules, State Law, and the FDCPA.

Payscout provides continuous education and best practices to partners/merchants to ensure compliant practices are adhered to and followed.

Additional Questions?

We hope that through this guide, you have been able to gain a clearer understanding of how PayFac Models can be used to keep your business compliant and what to look out for when assessing a PayFac model. If you have any additional questions, please do not hesitate to reach out to our team at

Top Trends to Influence ARM Payment Processing in 2021

Two major changes are set to influence payment processing in the Accounts Receivable Management (ARM) industry in 2021. To ensure that you are prepared for these upcoming changes, we have outlined what these trends are, what to expect, and what this means for your business. 

New CFPB Rule:

 The Consumer Financial Protection Bureau (CFPB) has outlined a new debt collection rule – known as Regulation F (or “Reg F”) – which serves to update the Fair Debt Collection Practices Act (FDCPA). This new rule will, for the first time, provide safe harbor for collection agencies to send electronic communications via voice mail, email, and text messages.

 Under Reg F, collectors are barred from harassing debtors via phone, text, and email, adding modern communication tools to the traditional phone call as regulated practices. Debt collectors are also required to offer consumers “a reasonable and simple method” to opt-out of communications sent to a specific email address or phone number. Furthermore, if a debt collector uses electronic communications to reach a consumer, the consumer can use the same technology to submit a “cease communication” request or notify the debt collector that they refuse to pay the debt.

 As this is the first time that such guidance on electronic communications has been released, it is extremely important to stay informed and use these electronic communication tools in a manner that is compliant with the new rules. All in all, this is easier to control when using the right provider for texts, emails, chats, and any other consumer-facing information. Remember that if account information is provided to the consumer, the format is considered a “communication” so your web portal and IVR may be covered as well. While there are varying degrees of services provided to meet the new requirements (for example, some solutions have two-way texts, while some do not), you’ll need the best, most inclusive communication tools to ensure that all the requirements set within Reg F are met. Payscout’s proprietary payment platform offers access to a multitude of peripheral inputs – including emailing, SMS messaging, chat messages, and debtor negotiation portals – while maintaining full compliance with Reg F. If your payment platform is not equipped to fully support the updated forms of communications, be sure to contact to take advantage of this major change in 2021.

FDCPA Violations

Up until now, it’s been the case that plaintiffs’ attorneys would actively seek to entrap collection agencies for violations of FDCPA protocols. Now that the FDCPA is effectively being “modernized” to address new forms of electronic communications and provide safe harbor language, these attorneys will look elsewhere for opportunities to claim Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). Since safe harbors are now in place for new forms of communication, plaintiffs’ attorneys will be looking for new”violations” to attack. In particular, one area that will likely see enhanced attention is Convenience Fees.

With the expected focus on Convenience Fees, it is more important than ever to ensure that your Convenience Fee solution is fully compliant. If you are looking for a compliant solution, Payscout’s 360˚ Fee-Free solution is fully compliant with the Card-Brand rules, FDCPA, and state law, allowing you to eliminate your risk of violating compliance requirements. This is often not the case, as there are prominent payment processing providers in the ARM space today promoting Convenience Fee solutions that are not compliant with Card-Brand rules, thus putting you at risk for lawsuits and severe penalties. One of the easiest ways for you to ensure that your Convenience Fee solution is compliant is to ask your payment provider if the convenience fee is applied separately or as part of the principal transaction. Visa explicitly requires the fee to be included as part of the original transaction, so any provider that charges the convenience fee as a separate transaction is therefore not offering a compliant solution.

What does this mean for your business?

It is crucial to monitor (or select a payment provider that monitors) changes in the ARM space in order to stay informed. For instance, the CFPB has in fact just released the second part of their debt collection rules, which we are reviewing and will be providing further guidance on.

With the upcoming change in administration, we can expect even more updates for the ARM industry to come, and taking all these changes into account, is it it is more important than ever for those in the ARM space to audit their technology to ensure that they are fully prepared for the upcoming changes. The new Reg F provides safe harbors for collection agencies to implement more methods of communication, which means that it is time for you to implement the best-in-market tools for SMS, emailing, chat, and debtor negotiation. With these new safe harbors in place, plaintiff’s attorneys will likely be focusing more on Convenience Fee compliance, so it is critical to act now to ensure that your convenience fee solution is in full compliance with the Card-Brand rules, FDCPA, and state law. 

To learn more about how you can be better prepared for the upcoming changes next year, contact our team at


Is your payment processor lying to you? Three key ways to identify processor dishonesty. 

In the payments industry, there always seem to be a number of payment processors engaging in dishonest business practices, which can lead to merchants being misled and deceived if they are unaware of how to spot offers that are too good to be true. At Payscout, Integrity & Trust is our first Cultural Attribute, so we created this guide to help you identify processor dishonesty and recognize if a processor is engaging in unethical practices.

Image Credit: katemangostar

Here are our top three ways to know whether your payment processor is lying to you:

  1.  If they are hiding fees from you.
  2.  If they are trying to lock you into a contract.
  3.  If they claim to have preferential Interchange rates.

If they are hiding fees from you.

Each month, merchants typically receive a statement from their payment processor, with an itemized breakdown of their monthly processing fees. The statement should clearly display any fees that were charged directly by other parties (e.g. card-brands or banks), as well as fees that were charged by the payment processor. However, some processors will mislead merchants by disguising their own mark-up fees as part of the fees charged by the card-brands or banks, which are typically less than .20% of the processing volume. As a result, it may not be apparent to the merchant that the processor is charging additional fees, because the processor has hidden these additional fees under other items in the statement. This is one of the most common ways that processors mislead merchants about their fees, which is why it is crucial to understand what the charges on your statements are and how they are calculated, so that you can recognize if anything is out of place. (If you need help with understanding your monthly statement or determining if any fees have been misrepresented, please contact our team at for assistance.) 

If they are trying to lock you into a contract.

When choosing a payment processor, another warning sign that your processor is being dishonest is if they try to lock you into a contract. There is no requirement for merchants to be committed to a processor for a fixed amount of time, but oftentimes contracts are issued by dishonest processors to force the merchant to stay. Since many bank contracts include a term and termination clause, the processor should be willing to state in writing that it won’t be enforced. If a payment processor was engaging in ethical practices, they would provide the merchant with the choice to stop processing payments if they wished to, and would not try to deceive the merchant into being obliged to process payments with them with no way out.

If they claim to have preferential Interchange rates.

Currently, there are processors who claim to be able to lower your Interchange rates, or provide you with special discounted rates. This is a major red flag that the payment processor is misleading you on pricing, as Interchange rates are set by the card-brand companies and are therefore non-negotiable and non-adjustable. In these cases, what is actually happening is that the processor has added their own mark-up fees onto the interchange rate – resulting in a false rate that is higher than the standard rate – and then has subsequently offered to lower this false rate. Therefore, if a processor claims to be able to offer preferential Interchange rates, you should immediately be wary, as Interchange rates are fixed and cannot be adjusted in any way by processors. For a more detailed overview on what Interchange is and what to look out for, take a look at our Interchange Explainer article.

 If your payment processor has displayed any of the three warning signs that we have discussed in this article, then you should be concerned, as they are likely engaging in dishonest business practices aimed to mislead customers. We hope this information will enable you to be more informed about processor habits so you can detect dishonesty, protect your business, and steer clear of processors engaging in unethical practices. If you have any further questions or concerns, our team at would be happy to provide you with any additional information you may need to ensure that you are fully informed at all times.

The Truth About Interchange

Interchange fees make up the largest portion of a merchant’s payment processing costs, however, it is often not clear what these fees are and how they are charged. In some cases, processors can contribute to this lack of clarity to make their quotes seem superior. In this article, we will break down interchange fees to leave you with a clearer understanding of what interchange is, how it works, and what you should look out for.

What are interchange fees? 

Interchange Reimbursement Fees, commonly known as interchange fees or abbreviated as IC, are a type of transaction fee charged by the card brands and passed through acquiring banks whenever a credit or debit card transaction is made. When a card transaction occurs, the card brands (Mastercard, Visa, Discover, American Express, etc.) charge the acquirer (the processor) a fee for the transaction in order to cover expenses such as handling costs, fraud protection, potential risk, as well as for the use of their settlement networks. The acquirer will initially bear these costs on behalf of its merchant and will then charge these fees on the monthly statement as part of the merchant’s regular transaction expense. Sometimes, interchange fees will be bundled under tiered or flat rates that include other fees and the processor’s mark-up or profit. In other cases, the various interchange categories are listed individually on the statement, along with their costs, and a separate discount fee is added above that to cover additional processor expenses and allow for profit. 

How are interchange fees determined?

Interchange fees are determined based on interchange rates, which are set by the card brand companies (i.e. Visa, MasterCard, Discover, and American Express). These rates are published in interchange fee tables, which for Visa and MasterCard, are revised twice a year, typically in April and October. Each card brand sets its own interchange rates, which are in the form of a percentage of the transaction, plus a flat per item charge. For example, if the interchange rate for a transaction is 1.5% + $0.10, then for a $10 transaction, this would amount to $0.15 + $0.10 = $0.25. 

What factors affect interchange rates?

The interchange rate category a transaction falls under will vary based on a number of factors, such as: 

  • Merchant’s Business Type: Based on the merchant’s business type/industry, a Merchant Category Code (MCC) will be assigned. The interchange category that a transaction falls under is impacted by the MCC, and MCC’s with larger potential risk (such as casinos) will receive higher interchange rates. For some business categories such as Retail and Supermarkets, interchange categories may be split into different tiers based on certain threshold criteria such as the number of transactions, total transaction volume, and compliance with PCI-DSS.
  • Card Type: Interchange rates are set by the card brands, and so interchange rates and categories will vary between the different card brands. Within a single card brand, rates will also differ by card type, for instance, credit cards have higher rates than debit cards due to the larger risk credit card transactions carry, and rewards cards often have higher interchange rates due to the additional perks they offer. Card ownership also comes into play here, with corporate or government cards falling into different interchange categories as compared to consumer cards,  primarily due to the additional services available to those ownership types.
  • Transaction Method: Transactions made in person (card present) are deemed less risky than CNP (card-not-present) transactions (such as payments made online or via the phone), as the card data can be captured directly instead of being manually entered. As a result, interchange rates for CNP transactions are priced higher than card-present transactions. 

The combination of factors discussed above determines the specific interchange category for every single card transaction processed by any merchant for any cardholder.  To put it in perspective, the least expensive transaction to process is one made in person, at a grocery store, with a debit card because grocery purchases present very little risk.  An example of a high cost transaction would be a phone payment for future travel reservations using a high value corporate card because greater services (rewards, special statements, etc.) are provided to that cardholder and payments for future travel are frequently canceled or charged back if there are problems.

What should I look out for?

As interchange rates are set by the card brands, this means that interchange fees must be charged based on the rates specified in the interchange fee tables. However, some payment processors have claimed to be able to offer lower interchange rates due to “special arrangements”, which by definition is not possible, as these rates are non-negotiable. While a merchant’s total interchange costs can be lowered by adjusting how they accept payments in order to qualify for a lower-cost category, the interchange rates themselves are fixed and cannot be adjusted. Therefore, if a payment processor claims to be able to offer lower interchange rates, this is patently false.

Payment processors may also disguise additional mark-up fees as interchange fees, for example, if a fee is 1.5% + $0.10, they may display it on the merchant’s statement as 1.65% + $0.10, in order to disguise their own mark-up fees as part of the interchange fee. This practice is known as “padding”, which once again is something to look out for, as interchange rates should not differ from those set by the card brands. 

Every processor has access to the same interchange costs provided by the card brands, but since certain merchant category codes (MCCs) have lower interchange costs. As in all lines of business, there are “bad actors” among processors who can miscode merchants to try to achieve lower interchange rates, but these actions put the merchant at risk for fines and or account closures. 

At Payscout, we strive for transparency in pricing and work with all our partners, agents, and merchants to provide the analysis, insight, and information necessary to fully understand interchange costs. Our understanding and expertise is your advantage. 

If you have any additional questions or concerns about interchange fees, please contact our team at for more information.

$5M Consent Order: A Cautionary Tale on Convenience Fees

In October 2020, the Consumer Financial Protection Bureau (CFPB) ordered Nissan Motor Acceptance Corp. (NMAC),  the auto financing subsidiary of Nissan’s North America division, to pay $4 million in fines and refund its customers a total of $1 million, due to numerous violations against the Consumer Financial Protection Act’s (CFPA) prohibition against unfair, deceptive and abusive acts and practices (UDAAP).

Judge Gavel
Photo Credit: Sora Shimazaki

NMAC accepted payments over the phone via a third party payment processor, which charged consumers a $5 fee for electronic checks or in-network debit cards, and a $12.95 fee for credit card or out-of-network debit cards. Consumers who chose to pay by credit card/ out-of-network debit cards, however, were not informed of the alternative payment options available to them, resulting in customers paying significantly more than if they had known of the difference in fees and subsequently selected the lower-fee option. 

NMAC was deemed responsible for the third-party payment processor’s neglect of compliance requirements and was consequently ordered to refund $1 million of customers’ fees, highlighting how crucial it is to select payment service providers and software partners that fully abide by compliance requirements, including card brand rules. 

Payscout has always maintained that a violation of card brand rules could potentially result in a UDAAP claim under FDCPA or an action brought by the CFPB.  The specific violations in this case were: 

  1. The varying fees, when the rule clearly states that all payment types taken via a common channel, must carry the same fee.
  2. Failure to provide the appropriate disclosures, including the availability of a free option, and obtain consent from the consumer for the convenience fee.

Currently, many payment service providers in the ARM industry are offering solutions that are not fully compliant, resulting in the risk of lawsuits, significant fines, and the potential of your business being completely shut down.  

At Payscout, we care deeply about compliance, and as a result all our solutions are designed with compliance in mind, to ensure that we keep you fully protected at all times, including compliance with the card brand rules. To make sure your solution is fully compliant, contact us at

Payscout’s Paywire Gateway: Features, Updates, & Enhancements

This article will be continually updated whenever any updates are made to the Paywire Gateway, to ensure that you have the most up-to-date information at all times. 

Payscout’s Paywire Gateway is an ecosystem of payment solutions designed to increase conversions, enhance compliance, and lower processing costs.


From multi-channel processing options including API, Virtual-Point-of-Sale (VPOS), Off Site Buy Page (OSBP), OCX Desktop, Software Integration, and more — to standard and alternative payment methods from Visa, Mastercard, and American Express to Boleto Bancário, UnionPay*, Check 21, ACH, remote check capture, and many more — the Paywire Gateway is designed to help merchants process more payments in more channels with more methods. 

See below for updates on Conversion Solutions including Recurring Payments, Customer Vault, UnionPay, and Brazilian Credit Cards and Boleto Payments.


Paywire is a Level 1 PCI DSS-compliant payment platform that is designed to reduce the scope of our partners’ PCI compliance. From PCI-validated point-to-point encryption (P2PE) to  360° Fee-Free solutions which comply with Federal Law, State Law, and Card-Brand rules — we are always adding new features and enhancements to the Paywire Gateway, but compliance is the foundation that underpins our solution, and every new channel or method we add is a new protected part of the Paywire ecosystem. 


Our 360° Fee-Free Payments was designed with compliance in mind, and in addition to providing significant reduction to a merchant’s payment processing  costs, it eliminates worry about lawsuits, fines, or merchant cancellation. Our solution includes support for Credit Card, Debit Card, and ACH Processing. We’re now rolling out a Cash-Discount beta product which was again designed explicitly to comply with Federal, State, and Card-Brand guidelines. The Paywire Ecosystem was designed to provide fully-compliant solutions that help merchants cut processing costs securely and without compromising the business. 

We’re always working on adding new features and enhancements to the Paywire Gateway. To ensure that you’re aware of these updates, we have compiled an overview of the key highlights below.

*Payscout is a Principal Member and Global Acquirer for UnionPay International.

General Enhancements:

  • Brazilian Credit Cards and Boleto Payments
    • Users now have the ability to process Brazilian credit cards and Boleto payments on the Paywire Gateway.
    • Celer credit card integration is implemented via API, OSBP and VPOS. The integration supports the following functions: Sale, Refund and Void, Recurring, Tokenization, and Customer Vault.
  • UnionPay Integration
    • Paywire’s UnionPay integration is implemented via API, OSBP, and VPOS. This integration supports complex OSBP scenarios such as one-time sale, token, multi-currency, and multi-language.
    • The UnionPay integration supports both UnionPay SecurePlus, as well as standard processing without an SMS code.
    • Recurring payments are possible without an SMS code. This is handled by conducting the initial payment using SecurePlus to create a token, and then conducting the subsequent transaction with non-SecurePlus.
  • ACH Rejected Transactions
    • Rejected transactions have now been added to the ACH returns report. Previously, users could only access these transactions via API or transaction search.
  • Cash Discount (Beta)
    • Custom reports for Cash Discount have been created for customer reconciliation.
    • Special statements specific to Cash Discounts are also available now for CD customers.
  • Remote Check Capture
    • Remote Check Capture (RCC) functionality has been added to the Paywire Gateway.
    • RCC is a new transaction type, which is affected by sending an ACH transaction with a different SEC code. This in turn is converted into a Check 21 transaction, which is subject to more business-friendly rules as compared to ACH.
    • The RCC functionality is applicable to both API and OSBP.
  • Recurring Payments
    • There are now 3 options for setting up recurring payments (previously only option 1 was available): 
      1. Process a $1 transaction and void it prior to setting up the recurring payment, in order to verify card validity.
      2. Send a card verification request to the card brands to verify card validity.
      3. Validate the card number at the gateway level only, according to the standard card number verification algorithm.  
    • All 3 of these options are configurable in the MID configuration in the Paywire gateway. 

VPOS Enhancements:

  • Customer Vault
    • The ability to assign a customer’s name to the payment record has been added to the customer vault, to help enhance reporting.

Additional detail is available through your relationship managers. If you would like further information or have any questions, please contact and we will be happy to assist you.

October 2020 Card Association Updates

In October 2020, a series of updates from Visa and Discover will take place. In this article, we will take a look at some of the key upcoming changes.


Authorization Response Messages

From October 16 2020, the Field 44.1 (Response Source/ Reason Code) of authorization response messages will be replaced from the current value of a space to the value of “V”. The “V” will be used to indicate that the item was authorized online, either by an issuer or by Visa on behalf of an issuer.

B2B Virtual Payments Program 

The Visa B2B Virtual Payments Program provides online travel agencies/service providers/payment providers with the ability to use virtual accounts. This program currently has a single interchange fee program- the Global B2B Virtual Payments Fee Program. Effective October 1 , Visa will be introducing a new interchange fee program and variable rates, both of which will be dependent on agreements between issuers and program participants. The B2B Virtual Payments Program will also be expanded to include deferred debit* and prepaid card products, and both existing and new interchange fee programs will be eligible for these new card products.

*only issued in Europe.

Consumer Credit Merchant Segment Incentive 

Visa’s Retail 2 Program will be eliminated, and new interchange rates for Insurance, Services, Education, Healthcare, Real Estate, and Advertising will be introduced. In addition, the Services interchange rates will feature a minimum ticket size qualification, meaning that the incentive interchange rate is only available for transactions of $100 or greater. The ticket size qualification for Education, Healthcare, and Real Estate transactions will be for transactions of $500 or greater.

The new ticket size qualifications that are being introduced are designed to benefit higher ticket transactions from these sectors. As a provider specialized in the Education, Healthcare, and Retail sectors, Payscout can help you take advantage of these upcoming interchange rate changes.

Consumer CNP Interchange

The interchange rate name for CPS-qualified card-not-present transactions will also be modified to “Product 1”. Additionally, card-not-present interchange rates will be increased, meaning that transactions made online or over the phone will incur greater fees.

For those in the Accounts Receivable Management (ARM) sector who take payments online or over the phone, these upcoming fee increases mean that now is the best time to implement a convenience fee model, in order to avoid increased costs to your business. As the only fully-compliant solution in the ARM industry, Payscout’s convenience fee model can help businesses offset these fees while ensuring full compliance.


PSL- E-Commerce U.S. Consumer Interchange Fee Program

A tolerance level validation test will be introduced to the program and will require the transaction amount at authorization compared to the transaction amount at clearing/settlement to be within the tolerance levels set by Discover. The tolerance levels will be dependent on MCC (Merchant Category Code), and have been outlined in the table below. Note: CNP and e-Commerce partial shipment transactions are exempt from the validation tests.


Tolerance Level

4121 Taxi Cabs/Limousines

7230 Beauty/Barber Shops

+/- 20%

3000-3350, 4111, 4112, 4131, 4411, 4511 Passenger Transport
3351-3441, 7512,7513, 7519 Car Rentals
3501-3999,7011, 7012 Hotels
5541 Service Stations

5542 Automated Fuel Dispensers

5812 Eating Places/Restaurants

5813 Drinking Places (Alcoholic Beverages)

5814 Fast Food Restaurants

5815-5818 Digital Goods


All other MCC’s

+/- 10%

To learn more about how to better prepare your business to take advantage of these upcoming changes, contact

Merchant Best Practices During a Pandemic: Communication is Key

Payscout is proactively monitoring merchant activity during the COVID-19 Pandemic, and is increasing communication with merchants as trends emerge. Here is a high-level overview of the Best Practices associated with merchant activity during this time of crisis. 


Communication is Key

In these uncertain times, it’s crucial for merchants to communicate clearly and often with their customers. As an example, if a business has been affected in a way that results in delivery delays outside the normal time frame, the merchant should proactively communicate these delays with their customers, and offer refunds when applicable. At a minimum, increasing communication with your customers — with signage, alerts, or mass emails — is critical. The more open communication merchants can maintain with their customers, the better the outcomes will be.

Review Your Refund Policy

This is an important time to review your refund policy. In particular, one thing to avoid is issuing refunds on cards that were not used for the original transaction. Merchants should never do this. The consumer can still chargeback that transaction, and the likelihood of winning a dispute in this context is very low. On top of having to refund the transactions, merchants can be saddled with arbitration fees — and these issues can ultimately delay the settlement of funds at a time when cash-flow considerations are of the utmost importance. Be proactive: Review and update your refund policy to avoid these issues.

Consider Alternative Payment Channels

Everyone, from your customers and clients, to your employees and vendors, is understandably concerned about their health and exposure to germs or contaminants. The channels through which you’re accepting payments should also be a part of your health and safety considerations. A near-field communication (NFC) or contactless card-reader is an excellent place to start for card-present transactions, and there are many viable alternatives to processing transactions remotely. These range from customer-centric options such as hosted payment pages or online portals, to internal-employee options like virtual terminals for processing phone (MOTO) transactions. 

Safety Applies to People and Payments

Adding these channels is quick and easy with Payscout — and the second-most important consideration after your customer and employee health and safety is the security of data/information in these payment channels — and we’ve got you covered there, as well. Our secure payment solutions are all PCI-compliant, and we have integration options that can significantly reduce the scope of your compliance requirements or take you out of scope for PCI-compliance altogether. This is our expertise, and we’re here to make it easy for you.

If you have any questions about ensuring your business preparedness during COVID-19, contact us at any time at 888-689-6088.

Mastercard Chargeback Monitoring Program Updates

Mastercard has recently updated its Chargeback Monitoring Program. The new updates involve 2 different programs: the Excessive Fraud Merchant (EFM) Compliance Program and the Excessive Chargeback Program (ECP).

The EFM Compliance Program is intended to mitigate fraud on e-commerce transactions, while ECP is targeted at monitoring and reducing excessive chargebacks. Both programs have thresholds for fraud or chargebacks, and merchants are required to remain below these thresholds. When merchants exceed the threshold, they will be entered into a category and will receive a  fine ranging from USD $500 to $200,000, based on how long the merchant is in the program for,and the number of chargebacks received. 

Below are the thresholds for EFM and ECP:

EFM (Excessive Fraud Merchant Compliance Program)

  • The total dollar amount (or local currency equivalent) of fraud-related chargebacks in a given month exceeds USD 50,000.
  • The total number of fraud chargeback basis points (bps) is greater than 50.
  • The percentage of monthly clearing volume processed using 3DS (including Data Only transactions) is less than 10% in nonregulated countries or 50% in regulated countries.

*The EFM Program does not apply to merchants in Germany, Liechtenstein, St. Helena, and Switzerland. 

ECP (Excessive Chargebacks Program)

There are 2 levels in Mastercards’ Excessive Chargeback Program: Excessive Chargeback Merchant (ECM) and High Excessive Chargeback Merchant (HECM). In both cases, merchants are entered into the category when the two conditions listed for each program are met.


  • The total number of chargebacks is greater than 100.
  • The total number of chargeback basis points is greater than 150. 

High ECM

  • The total number of chargebacks is greater than 300.
  • The total number of chargeback basis points is greater than 300.

What do these changes mean for me? 

To ensure compliance with Mastercard’s Chargeback Monitoring Programs, it is critical that merchants select a payment processing provider that is experienced in monitoring chargebacks and fraud. To learn more, contact today.