Processor Requirements for Signing a Merchant

Visa and MasterCard member banks must directly enter into a written merchant processing agreement with each merchant from which they acquire transactions.

A member bank can only submit into interchange transactions arising in connection with products and services provided by a commercial entity that a cardholder purchases with a payment card, after the commercial entity has entered into a valid merchant processing agreement with the member. This rule applies regardless of whether the ability to use the payment card is explicit or implied, or whether the card is presented directly to the commercial entity, a third-party payment processor, or any other person. A commercial entity is any person that sells goods or services on an ongoing basis and that maintains a physical or virtual presence for the purpose of selling goods or services. This rule does not prohibit a commercial entity from being the recipient of funds that result from a money transfer transaction, provided the transaction is properly identified as such to the card issuer and cardholder with the appropriate merchant category code (MCC) and transaction category code (TCC) in all authorization and clearing records.

Regardless of whether a member bank uses an Independent Sales Organization (ISO) or a Member Service Provider (MSP), the member must itself execute a written agreement directly with each merchant. The agreement must reflect the member's primary responsibility for the merchant relationship and must comply with Visa and MasterCard standards and regulations. The merchant agreement can contain other provisions that may be agreed upon between the member bank and the merchant, provided that the provisions do not conflict with Visa and MasterCard standards and regulations.

The member bank is responsible for ensuring that each of its merchants complies with Visa and MasterCard and regulations, including those applicable to unique transactions, cardholder-activated terminals, and the like, and is responsible for the merchant's failure to do so. The member bears the responsibility for each merchant's compliance and must take appropriate actions to ensure it, such as reviewing the merchant's deposit records and procedures for effecting transactions.

Before entering into, extending, or renewing a merchant agreement, a member bank must verify that the merchant from which it intends to acquire transactions is a bona fide business and that the transactions will reflect bona fide business between the merchant and the cardholder.

A member bank must retain all records concerning the investigation of any merchant with which it has entered into a merchant agreement for a minimum of two years after the date the agreement is terminated.