How Accepting Credit Cards Can Make Your Credit Department More Efficient, by Michael Williams

For personal finance, credit cards are clearly the preferred payment method for most every qualified consumer. However, in the B2B marketplace, many companies have either limited acceptance or even shied completely away from accepting credit cards due to high service fees and integration costs. Even with the relatively high cost of processing, credit cards do offer some advantages to your company that will help bring efficiency and shift risk to the credit card company. How can your company gain efficiency by accepting credit cards and what’s in it for you?

  • LOWER YOUR CREDIT CARD OVERALL COSTS: Credit and treasury managers must understand all the options available for price reduction and how to make sure that you are both minimizing risk and taking advantage of every available option.
  • RECOUP YOUR CREDIT CARD FEES THROUGH SURCHARGE AND CONVENIENCE FEES: The Network Surcharge Rules are loaded with twists and variables, so it is imperative to have qualified individuals to guide you through that minefield.
  • ELIMINATE CREDIT CARD FEES WITH A CREDIT CARD ALTERNATIVE: There is a viable alternative to credit cards which has proven its value time and again over the years. This alternative is one third the cost of a credit card and a much more secure transaction with no chargebacks.

As an exclusive NACM partner for over 20 years, United TranzActions has been successful in advising members on how to process credit cards more efficiently, how to save dollars, and how to maximize the value of their use of their credit card usage. UTA will be one of the featured companies attending the upcoming CreditScape Summit, powered by UTA, in Garden Grove, California on April 12, 2017. More information on the conference is available at I’d love to speak with you at CreditScape and see how we might help you in the credit card arena. And if you are unable to make it, feel free to reach out to me anytime for any advice on your payment processing needs.

Michael Williams is VP NACM Relations at United TranzActions. He can be reached at 305-606-6703, or

The U.S. Supreme Court to Rule on Whether States May Bar Credit Card Surcharging: What it Means to a Supplier’s Right to Surcharge in the B2B Space?, by Scott Blakeley, Esq.

Credit cards are the fastest growing payment form. But the payment form is the most expensive for suppliers, leading many to rollout surcharge programs to offset the majority of the card costs. The Supreme Court’s recent decision will settle the constitutionality of state no‐surcharge laws.

For many suppliers, credit cards have not only become the preferred payment form for customers, but one of the most significant operating costs for suppliers. A mandate from the finance team is to make cards cost competitive with other payment forms. The way to offset rising costs is through a surcharge, passing the interchange fee (approximately 85% of the card charge) to the customer.

As part of a class action settlement with retailers in 2013, Visa and Mastercard amended the network rules to allow merchants, including suppliers, to surcharge. With the card networks allowing surcharging, suppliers considered as part of their nationwide surcharge rollout, whether 10 states that enacted nosurcharge laws limit the suppliers’ surcharge strategy.

The constitutionality of the state no‐surcharge laws has been vigorously challenged, with the litigation focused on whether the no‐surcharge laws violate the First Amendment and commercial speech on pricing, or instead whether they regulate economic conduct. No‐surcharge states allow merchants to provide discounts to cash and check payers, but not add a surcharge to credit cards. The Supreme Court has agreed to hear an appeal from the Second Circuit Court of Appeals that involves the constitutionality of no‐surcharge laws. The Supreme Court is expected to rule not later than June, 2017. How will the Supreme Court’s ruling affect suppliers’ right to surcharge? Are there steps suppliers should take during the pendency of the Supreme Court’s review, whether a surcharge has been rolled out or is about to be?

States No‐Surcharge Law Overlay

In 1976, the U.S. Congress enacted a federal law prohibiting surcharging. The credit card networks enacted contractual provisions in their merchant agreements barring surcharging. In 1983, the federal law barring surcharging expired. With the sunset of the federal law, the credit card networks lobbied state legislatures to enact no‐surcharge legislation to discourage retailers from surcharging consumers. Those 10 states that enacted no‐surcharge laws are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

The uniform theme of the states enacting no‐surcharge laws is to protect consumers within their states from retailers adding a charge to cards, therefore acting as a form of tax on those consumers choosing cards to pay for their goods or services.

The no‐surcharge laws allow merchants to charge higher prices when a customer pays with a credit card, provided they disclose that the price difference is a cash discount and not a card surcharge. While surcharging is a more accurate disclosure the costs the merchant incurs with accepting cards rather than a cash discount, the card networks were concerned in lobbying for no‐surcharge legislation that surcharging may discourage card use.

Litigation Challenges to No‐Surcharge Laws

Of the ten states that have enacted no‐surcharge laws, four have had their laws challenged as unconstitutional. In 2013, the first litigation challenge was brought in New York, where five New York businesses sued New York, challenging the law on free speech grounds. The District Court found the nosurcharge law unconstitutional and overturned the law, but was reversed on appeal to the Second Circuit Court of Appeals. The Second Circuit determined that prices set by retailers was not “speech”, and therefore, the First Amendment was not relevant. The Second Circuit focused more on how surcharging was labelled, rather than the implications of the fee or its cost to merchants and consumers. Similar litigation challenges were brought in California and Texas. In March 2015, a federal court in California found its no‐surcharge law unconstitutional and unenforceable, which the state attorney general has appealed to the Ninth Circuit Court of Appeals. On the other hand, in Texas the no‐surcharge law was upheld, and that decision was affirmed by the Fifth Circuit Court of Appeals. By contrast, the Florida no‐surcharge law was upheld, but reversed on appeal by the 11th Circuit Court of Appeals. The card networks are not directly involved in the litigation challenges, but deferring to the states’ nosurcharge defense.

The Topic for the Supreme Court to Decide

The U.S. Supreme Court granted review of the Second Circuit Court of Appeals, where the court dismissed the free speech arguments and found the New York law only regulated economic conduct. The Supreme Court is the highest federal court and has the final ruling on constitutional law, which is at issue with the no‐surcharge laws.

The businesses challenging the state no‐surcharge laws contend the surcharge bar violates their free speech rights because it prevents them from freely disclosing their pricing alternatives. Merchants are
not allowed to say they charge card customers a higher price for cards, although a surcharge is a more accurate description of the costs of cards. An example: a product is priced at $1,000, plus $20 if a credit
card is used. This is a surcharge and impermissible under the no‐surcharge laws. But if the product is priced at $1,020, with a $20 discount for cash, is permissible.

More States Enacting No‐Surcharge Laws?

During the pendency of the Supreme Court’s consideration of the no‐surcharge laws, is there an effort by other states to adopt no‐surcharge laws? The answer is no. The chart below summarizes recent states’ efforts to consider enacting no‐surcharge laws. Not one state has adopted anti‐surcharge legislation since Visa and Mastercard settled their class action litigation and amended their rules to allow suppliers to surcharge customers in 2013.


Retail/Consumer vs. Supplier/Business Customer and No‐Surcharge Litigation

The focus of the no‐surcharge litigation is retailers complaining about pricing disclosures with point of sale payments by consumers. A number of national retailers filed amicus briefs in support of the plaintiff retailers requesting the Supreme Court to rule on the issue. While the Circuit Court rulings have not expressly carved out suppliers and their business customers from the reach of no‐surcharge laws, the entire focus of the no‐surcharge litigation challenge relates to the facts of retailers and consumers.

What It Means to the Supplier and a Surcharge Rollout

What is a supplier’s surcharge strategy in light of the Supreme Court agreeing to weigh in on the nosurcharge laws? Whether the supplier has rolled out a nationwide surcharge program, or is in the process of doing so, the focus is on the customer base. If the supplier is selling to B2B customers, as opposed to selling directly to consumers, the supplier’s best practice is to condition card acceptance on the customer and cardholder agreeing to a card payment agreement form, that includes a contractual waiver and governing law provision. That provision provides that customers consent to waive the application of the surcharge prohibition when paying by credit card. That language may read:

All credit card commerce between [Applicant] and
[Vendor] shall be governed by and interpreted in
accordance with the laws of the State of [ ] without
regard to conflict of law provisions thereof, and all actions,
disputes, and proceedings arising from, relating to or in
connection with credit card commerce between [Applicant]
and [Vendor] shall be subject to the exclusive jurisdiction of
the federal district courts for [State] or, in the event the district
court lacks subject matter jurisdiction, the [State] state courts
located in [County]. For the avoidance of doubt, the
foregoing is intended to be a mandatory forum selection
clause divesting all other courts of jurisdiction to hear any
actions, disputes, and proceedings arising from, relating to
or in connection with credit card commerce between
[Applicant] and [Vendor].

The contractual surcharge waiver for B2B customers would be enforced during the pendency of the Supreme Court’s consideration of the no‐surcharge ruling, and after the ruling if the Supreme Court upholds the enforceability of the no‐surcharge laws.

The takeaway for the credit team is that a conclusive ruling on the constitutionality of the no‐surcharge laws will be forthcoming by Q2 of 2017. Having said that, suppliers selling in the B2B space may contract around the no‐surcharge laws through a card payment agreement with customers containing a contractual waiver and choice of law provision.

Scott Blakeley is a principal at Blakeley LLP, where he practices creditors’ rights and bankruptcy law. His email is

Suppliers Accepting Credit Card-Present Payments Take Heed To Adopt New Technology By October 1, 2015 Or Bear Risk Of Fraud Loss, By Scott Blakeley

The Wall Street Journal reports that credit card use in the B2B space continues to increase as a preferred payment channel for customers. Suppliers accepting cards in the B2B space commonly receive payment through card not present forms, whether through payment portal, email, fax or over the phone. For those suppliers that accept cards in the cardholder’s presence, card issuers are changing card acceptance rules to give cardholders greater protections from identity theft.

“Chip and pin” or “smart cards” are credit or debit cards that store data on integrated circuits rather than on traditional magnetic stripes. The transition to “chip and pin” or “smart card” technology is now largely underway in the United States. The transition is being assisted by the shift in liability for card-present fraud that will be implemented on October 1, 2015.

Currently, if an in-store transaction is conducted using a card obtained fraudulently, cardholder losses from that transaction lie with the payment processor or issuing bank. From October onwards, that liability will shift to the supplier that has not changed its system to accept chip technology. If a customer uses a chip card, the failure to update the card reader may permit a counterfeit card to be successfully used. In that scenario, the supplier will bear the cost of the fraud. Again, the supplier will only be responsible for the cost of the fraud if the fraudulent transaction is a card-present transaction.

The major benefit of using a “chip and pin” payment card, and what compelled the US to migrate its cardholders to the new generation of cards, is improved security and fraud reduction. Whereas magnetic stripe card transactions rely on the holder’s signature and visual inspection of the card, the use of a PIN and cryptographic algorithms provide authentication of the card to the processing terminal and the card issuer’s host system.

The identity of the cardholder is confirmed by requiring the entry of a personal identification number (PIN) rather than signing a paper receipt. Unlike magnetic-stripe cards, every time a smart card is used for payment, the card chip creates a unique transaction code that cannot be used again. This eliminates the possibility of card duplication fraud as the transaction code becomes obsolete and cannot be used in further transactions.

While much of the rest of the world has already been using “chip and pin” cards for several years, the US is now committing to migrate its credit card use to this more secure format. There is a historical viewpoint regarding the reason for this delay by the US in updating its credit card technology standards. In the past, fraud was much more prominent in markets outside of the US. What has happened, especially over the course of the past few years, is that since other markets have migrated to “chip and pin” cards and become more secure, fraudsters have moved their focus to the US market. Essentially, they came to the US market because they were looking for less secure networks from which to steal fraudulent credit card information.

For suppliers in card-present transactions, the switch to this technology means adding new in-store technology and internal processing systems, and complying with new liability rules. For cardholders, it means activating new cards and learning new payment processes. And for the supplier and cardholder, it means a more secure form of payment by credit card, and fewer opportunities for fraud to occur. As the credit team is responsible for managing risk, including risk of fraud with payment channels, the credit team must prioritize compliance with this new technology within the organization for card-present transactions.
Scott Blakeley is a principal with Blakeley LLP, where he practices creditors’ rights and bankruptcy. His e-mail is:

The Advantages (and Disadvantages) of Accepting Credit Card Payments, by Scott Blakeley, Esq.

Customers in the B2B space are increasingly using credit cards to pay supplier invoices. The upside for the cardholder and paying customer is the 30 extra days to pay the cardholder statement that includes the supplier’s invoice. Cards also reduce paperwork and allow the customer to eliminate the time and cost of processing A/P checks. The upside for suppliers is that payment by credit card means near immediate remittance, reduced credit approval and collection activities, reduced credit and bankruptcy risk, and new sales channels (attracting customers who otherwise may not qualify for terms). Further, by accepting cards only when the order is placed, the supplier also enjoys increased cash flow, improved DSO and reduced A/R.

Still, there are complications involved with accepting credit cards in the B2B space. One area where suppliers may have particular legal questions surrounding their policy concerning credit cards is in collections, particularly in suppliers using credit cards as a collection strategy on past-due accounts.

As a speaker at the upcoming CreditScape Fall Summit in Las Vegas, I will address the use of credit cards as a supplier collection strategy in scenarios where the customer has failed to pay. I will cover the rules of the supplier accepting credit card payments on past due invoices from a customer who cannot pay. The discussion will also include the possibility of a surcharge rollout, and the legal issues associated with surcharging the credit card using customer, including how handle the 2-4% interchange fee that credit card companies charge their customers.

Join me as we cover this topic in much more detail at the upcoming CreditScape Fall Summit, September 17-18 at the Tropicana in Las Vegas. For more information about the conference, visit I hope to see you there.
Scott Blakeley, Esq., is founder of Blakeley LLP, where he advises companies around the United States and Canada regarding creditors’ rights, commercial law, e-commerce and bankruptcy law. He will be speaking at the upcoming CreditScape Fall Summit, and can be reached at

Apple Pay And Its Implications As A Payment Channel For Customers To Pay Vendors’ Invoices In The B2B Space, By Scott Blakeley, Esq.

Scott Blakeley, esq.

By Scott Blakeley, Esq.
Blakeley & Blakeley, LLP

Apple has made a media splash with its announcement of Apple Pay, the latest foray of a tech company entering the mobile card payment space. While the B2B space has been slow to embrace electronic payment channel alternatives, especially those designed for smart phones and tablets, these alternatives are thriving in the B2C space. In another article “Payment Channel Alternative (Traditional and Emerging) For The Customer (And The Credit Team’s Preferences),” Lyle Wallis (VP Research, CRF) and I considered the topic of mobile payments. Apple Pay advances this payment form. But does Apple Pay provide insight for the credit team in the B2B space of what the payment channel may look like in the near future?

The Mobile Wallet: A B2B Payment Channel in the Near Term?

Electronic payments, especially in mobile form, are showing to be a most efficient and cost effective payment channel. Banks have invested in mobile options, which allow consumers to deposit checks, view balances and make transfers between accounts, all from their smart phone or tablet. Javelin Strategy and Research estimates that the average cost for a mobile banking transaction (deposit or transfer) is 50% cheaper than a desktop computer transaction and 90% cheaper than an ATM transaction. It costs J.P. Morgan Chase $0.03 to process a customer’s mobile check deposit, versus $0.65 where the customer physically deposits a paper check.

The mobile wallet has arrived. A mobile wallet can be peer-to-peer, consumer-to-business, or both. To use a mobile wallet, the consumer registers a new account with a provider and then connects that mobile wallet to their existing debit card and bank account. Once money is loaded onto the digital wallet, it can be sent to other peers and/or businesses also on the mobile wallet network. Then, should they desire, the consumer may “cash out” all or a certain percentage of their mobile wallet, and the funds are automatically routed back to the original bank account.

Consumers may choose a variety of mobile wallets: Google, Amazon, PayPal, Square, Venmo, and now Apple. Apple announced that its new iPhone 6 and digital watch give users the ability to pay for products and services just by tapping the device to payment terminals using Apple Pay. The service is a take-off of the Google Wallet, which has been available on Android phones since 2011. The mobile payment system uses a technology known as Near Filed Communication (NFC), which transmits a radio signal between the device (smartphone in this instance) and a receiver, when the two are fractions of an inch apart or touching.

Apple Pay, Data Breach and Card Security: Applications to the B2B Space?

The headlines regarding the Home Depot, Target Stores and Neiman Marcus data breaches have affected hundreds of millions of their customers. Vendors rolling out card payment programs in the B2B space are reminded to consider a cardholder’s privacy rights when they store the cardholder’s card information electronically. Apple recognizes the significance of cardholder privacy and intends to distinguish itself through greater card security. Major payment networks and banks have all been working on a system that allows customers to make a payment without handing over any personal details, using a kind of digital token that can be used only once. Apple Pay is the first program to use the tokenization system on a widespread basis. With each Apple Pay transaction, a user’s credit card number won’t pass through the system, just a scrambled, one-time code that can’t be used in any future transaction.

If a retailer’s systems are hacked, Apple Pay customers’ personal information is not compromised. The service also requires a thumbprint scan for each transaction, meaning that only the phone’s owner can use it to make purchases–a stolen smartphone cannot be used for fraudulent purchases. The devices’ operating software iOS 8 will also encrypt more of the user’s personal data (photos, messages, email, contacts, call history, iTunes content), where previous versions of iOS only encrypted a device’s email. These added security features are important and one of the reasons that Apple Pay has won over credit card companies and retailers. The iPhone 6 and the Apple Watch will use Apple Pay at merchant locations that have purchased the hardware that can read the wireless signal from Apple’s devices. Because merchants are already under pressure to upgrade their POS systems to accept EMV, a new card technology to reduce fraud, there is thus greater opportunity to add-on the NFC technology at the same time. Upgrades to POS systems have been mandated by the credit card companies and must be in place by late 2015 else the merchant will be liable for fraudulent credit card use.

Both Visa and MasterCard are on board with Apple Pay, and Apple is not charging them for allowing their products on Apple phones. Banks have agreed to accept lower fees from Apple than what they usually accept on credit card transactions, with their hope that cardholders will opt to use the technology in place of cash and other payment methods, thereby driving up the total number of transactions. Safer credit card transactions will lower the instance of fraud and thereby reduce card fees for everyone.

Apple Pay and B2B Implications

Can mobile solutions accommodate transactions in the B2B space? Mobile payment technologies have focused on the consumer sector. However, given the push for electronic payment alternatives in the B2B space, developers are pursuing B2B mobile payment technologies. Will businesses move to this payment channel, given the transactional efficiency and low processing costs of mobile payments? According to the AFP, only 11% of US companies surveyed are using mobile payment technologies.

Apple Pay is presently geared toward brick and mortar stores. Online application for card-not-present transactions is a key for the B2B space. The single use nature of Apple Pay technology (digital token) rules out use for multiple transactions (the credit team storing a card on file).

Applications will be developed that provide for Apple Pay technology to be used to pay vendor invoices in the near term.


Scott Blakeley, Esq., is a founder of Blakeley & Blakeley LLP, where he advises companies around the United States and Canada regarding creditors’ rights, commercial law, e-commerce and bankruptcy law. He can be reached at his email address.

The Illusion of a Good Deal

There’s no question that a lot people have a hard time wading through the confusing and overwhelming maze of data present on statements that they receive from their credit card processors. There’s a popular mental image that processors are merely robbing their customers, hitting them with a never-ending string of charges like convenience fees, access fees, risk fees, assessment fees, downgrades and the heavy-handed interchange.

“They do take advantage,” said Robert Day, assistant vice president, Commercial Interchange, Third Fifth Processing Solutions at the recent CMA webinar, “The Illusion of a Good Deal.” “Interchange is where your focus needs to be. The issuing side of the house is where the money is made…they’re the ones that are driving the interchange.”

Day warned that interchange, the fee collected by the acquirer from the merchant for every Visa and MasterCard transaction, can represent as much as 92% of a transaction’s costs. On commercial cards, the rate of interchange can be affected by the amount of detail a business can collect on the purchaser, such as zip code, location and tax ID as well as line item detail of the purchase, to lower the risk of the transaction being disputed. With lower risk comes a lower interchange rate, which can save anywhere from tens to hundreds of dollars on large ticket sales.

“Really, the key is getting the correct information and putting the information in correctly,” said Day.

But even if a merchant does this, it could be moot.

Beyond the tangled mesh of fees upon fees, the problem for most businesses is that the account with their processor or gateway does not match their business’ needs or practices. Having an account that is set up incorrectly, which typically happens because of lack of experience or knowledge from the merchant or an Independent Sales Organization (ISO), like a local bank that re-sells the credit card processing, translates into wasted money and time. ISOs outnumber processors over 100-to-1 and are very common partners for business accounts, but their limited knowledge could mean that it would be nearly impossible for businesses to achieve lower interchange rates.

Day also warned that processors will simply try to take advantage of businesses. A common practice is that a processor will offer an attractive base rate, which will appear boldly on page one of a merchant’s statement, if the merchant will agree that the processor doesn’t have to disclose the rate they charge for downgrades. In this type of agreement, the processor will deliberately leave out the column for transaction volume on the statement so that the percentage charged on downgrades can’t be figured out. Day explained that if credit professionals see that this one column is absent, it might be time to take another look at the relationship with that processor.

“It doesn’t matter what discount rate is shown on page one,” said Day. “Page one is there to humor you. Throw it away unless it aligns itself with page two. Otherwise, it just doesn’t matter.”