What Is a Merchant Agreement?

October 7, 2020 Ryan Ellis 0 Comments

A merchant agreement is a contract between a merchant acquiring bank (otherwise known as the acquirer) and a business. The acquirer is important in a merchant’s transactional processes, as they allow for the use of electronic or credit and debit cards as a method of payments for the goods that the merchant sells. The merchant agreement outlines the parameters of the acquirer’s relationship with the business, including expectations and rules of behavior. In addition, the details of the electronic payment services that the merchant acquiring bank agree to provide as well as the fees that merchants will be charged for transactions are found in a merchant agreement.

Thoroughly reading a merchant agreement is important for several reasons. Firstly, a merchant agreement protects you from sales agents who omit certain details or fail to disclose important contract terms. It also clearly defines every possible cost that you are, or could be responsible for while maintaining an account. Lastly, reading a merchant agreement before signing gives you a final chance to change your mind instead of committing to terms that you don’t agree within the first place.

Merchant agreements usually highlight the following rules and requirements:

  • The merchant must accept all valid credit cards issued by the payment network.
  • The merchant is required to display the logos of all the payment credit cards accepted.
  • The merchant may set a minimum transaction amount for accepting credit card payments.
  • The merchant can’t accept credit card payments for illegal purchases such as the sale of illegal items to minors.
  • The merchant is required to charge sales tax to credit card payments.
  • The merchant must have a clearly stated refund and return policy.
  • The merchant is required to train employees to recognize suspicious activity, fraudulent transactions, and counterfeit credit cards.

Acquiring Bank Relationships

Merchants need an acquiring bank relationship in order to sell goods and services using electronic transaction methods. Information is gathered from the merchant’s payment gateway technology and is then communicated to the card issuers via the acquirer’s network. Once authorization is received from the card issuer, the transaction is settled in the merchant account.

The fees for electronic payment processing services can vary, based on in-store and online transactions. Merchants pay comprehensive fees to the acquirer for every electronic transaction, which covers theirs and the payment processor’s fees. It’s also common for acquirers to charge merchants a monthly fee for settlement and bank account services.

Several terms within the merchant agreement are negotiable. Merchants can negotiate Early Termination Fees (ETF), liquidated damages clauses, the merchant account agreement contract length, processing rate plan, and certain other account fees.


Terminated Merchant File

A MATCH File (Member-Alert-To-Control-High-Risk) or Terminated Merchant File (TMF) is a database maintained by MasterCard Worldwide that contains information about terminated merchants. Other merchant acquiring banks and financial institutions such as American Express also rely on the MATCH List or TMF List to screen new merchant applicants to ensure they’re not a high-risk merchant. Any acquiring bank can add or remove merchants from the MATCH database.

Once a merchant is placed on the MATCH list, it’s difficult to open a new merchant account. Under a Terminated Merchant File, the business name, principal, and affiliated business partners on file are banned from opening any merchant accounts with a merchant account provider.

MATCH List merchants often face processing caps, higher fees, reserve accounts, or are forced to process transactions through off-shore solutions. MATCH List or TMF List removal is no easy task, which is why a blacklist merchant should work with a team of experts who specialize in MATCH List issues, merchant disputes, and electronic payment processor litigations.

Global Legal Law Firm has over ten years of experience specializing in electronic payments litigation and commercial collections representing ISOs, agents, processors, and credit card brands. The best way for any business owner or business account that has been TMF’d is to reach out to the right team of experts who know how to reach a favorable resolution and leads to deletion from the MATCH list/TMF List.

A merchant agreement is an important contract that every merchant should read carefully. It’s important to understand the rules, expectations, and requirements between a merchant acquiring bank and business so that there are no unexpected or unfair surprises along the way.