MasterCard and New BRAM Requirements: Sorting out the Facts and Rumors by Brad Ganzer, Ignite Payments Maple Grove
Online vapor retailers are seeing red when it comes to MasterCard’s recently revised “BRAM” registration requirements and the accompanying registration fees that went into effect on January 15th, 2017. BRAM stands for Business Risk Assessment & Mitigation, which has been around for a long time in the merchant services industry. What’s “new” or different now however, is that MasterCard has added “card not present sales of tobacco products” to its BRAM guidelines. (Retail vapor and tobacco are not affected by this current change.)
Most online vape retailers have already taken the steps to work with their processing companies to meet the new requirements. However, many have not; either because they are thoroughly confused or unaware. Both groups are crying foul, but If you’re an online retailer in the latter group that has not yet taken action, I urge you to note the following information and comply ASAP, for the sake of your business and your bottom line. Non-compliance can be met with your account being dropped and/or stiff penalties, up to $25,000 per month.
If this entire topic is “news” to you, check your recent credit card processing statements and you’ll almost certainly find that some version of the following sample notification was included:
SAMPLE: “Effective January 2017, MasterCard has revised their Business Risk Assessment and Mitigation (BRAM) compliance program and now requires all merchants in the category of card not present tobacco sales to register and pay an annual fee of $500. This includes electronic nicotine delivery systems, including vapor, electronic cigarettes, pens, mods, eliquids, nicotine gels, and more. etc. This revision was made in light of the recent extension of the FDA’s authority on all tobacco products including electronic nicotine delivery systems, aka END’s ….”
Given this change comes right on the heels of FDA Deeming Regulations AND that some processing companies chose to reference the FDA in their merchant notifications, there is a lot of misinformation being passed around, including speculation that this is a result of a backhanded effort by the FDA to further punish the Vapor industry. While it might seem to be more than a coincidence I don’t believe that MasterCard was ‘forced” into this decision by the FDA.
First, and most importantly, the vaping industry is not the only industry being affected. Others include: adult content and services that are not face-to-face; Gambling – not face-to-face; Pharmaceutical – not face-to-face; Tobacco/Vapor – not face-to-face; Government Owned Lottery; Skill Games; Cyberlocker; and Merchants already under the MasterCard Excessive Chargeback Program.
Second, the FDA has no direct control over MasterCard’s business practices. At their own discretion, MasterCard periodically adds new “core categories” to their BRAM practices; namely, things that are the focus of law enforcement or new regulations (Vapor certainly fits that bill). Beyond that, MasterCard may or may not have been influenced by the FDA via the “referral process” mechanism MasterCard takes into account, when examining certain businesses, industries or activity, in making merchant compliance decisions or changes.
Third, even if FDA deeming regulations were to be overturned or reversed after Friday’s inauguration, MasterCard will almost certainly not reverse these new requirements. They are getting decimated by chargeback fees from what are considered “high-risk” industries and online vapor sales fall into this category. The term “high-risk” in this case, generally means one thing – it is the amount, above the standard, at which chargebacks occur – and the industries that attract a lot of fraudulent cards and illegitimate refunds add a heavy cost to MasterCard’s expense report. “High-Risk” can also refer to the possibility or probability of illegal activity occurring. Selling tobacco products online brings with it a higher-risk that the products can be sold to minors than at an in-person transaction inside a brick and mortar storefront.
That’s “what’s so”, but here’s where it gets as little fuzzy …
I collected a number of notices sent out by processors to merchants on this matter and beyond the basics, almost all of them seem to differ somewhat, in what they are telling merchants is now expected.
What we know for sure is that all merchants in the category of online tobacco sales must now pay an annual $500 registration fee and must be registered with MasterCard by their processors. In addition, MasterCard wants to know that you are following all of the related and current FDA regulations. How they are verifying that, I do not know but I have received reports that they are in fact checking merchant websites for verification of certain information.
However, there are additional compliance measures being included in these notices that are neither consistent or verifiable and seem to be at the discretion of the processing companies (in other words, not necessarily mandated by MasterCard (determining what is in fact mandated is proving to be difficult.) These include: A) Legal Compliance Verification via an attorney letter or 3rd party verification or accreditation of legitimate business practices. While most processors are requiring this, not all are and exactly what form they want this to take seems to vary. B) An adult (age 21) signature requirement upon package delivery. C) “Must be 21 or over” stated on the merchant’s website and at the point of sale. D) A completed merchant questionnaire.
“So what are my options?” is a question that we keep hearing from affected online Vape retailers.
As a business owner in any of the affected industries, you have a few options to consider …
Option #1 – Don’t take MasterCard (?): There is a question mark there for good reason. While it is possible for your processor to turn off MasterCard, just as they do with AMEX/Discover at the merchant’s request, I have so far found no processor who is willing to turn off MasterCard.
Option #2 – Comply: grit your teeth, jump through the hoops, pay the registration fee and go to work making more sales to offset your costs.
Option #3 – Shop for a new processor that will help you pay the extra fee: No, they will not write a check on your behalf and they cannot waive MasterCard’s $500 fee. We must all impose the same MasterCard mandates. But – if you can switch to a processor with lower overall fees, who can save you in excess of $500 per year, than it all becomes a wash.
WHAT NOT TO DO
You’ll notice that none of the above options suggested DOING NOTHING! The costliest mistake a business could make would be to ignore this new MasterCard edict. Doing nothing will get you into hot water and could potentially put you out of business. (Remember the $25,000 per month penalty mentioned earlier?)
For a full rundown of the Registration Program and the 164-page guideline – Click Here.
Overview of BRAM practices >> http://www.mastercard.com/elearning/bram_v7/story.html
NOTE: This editorial is in no way meant to be interpreted or used as legal business advice. Please consult with a legal professional before making all business decisions. Additionally, each credit card company has their own set of security rules and procedures. Please speak with your merchant account provider to be sure you are in compliance with their requirements. In some cases, there are fines and even the possibility of losing your merchant account access if you are found to be out of compliance.
Brad Ganzer has spent 25 years in the financial services industry, the first 17 as business owner, manager and industry leader of a Midwest based mortgage company, doing nearly one billion in personal production. Brad has spent the last 6.5 years pursuing his true passion; that is, helping business owners succeed. At Ignite Maple Grove, he is in a position to consult with business owners on the critical cash flow aspects of business as well as help them grow with his company’s unique and proprietary social loyalty program, www.WeDonateLocal.com.
Ignite Payments Maple Grove is the endorsed merchant service provider for the Independent Vapor Retailers of Minnesota (IVRM) and is happy to answer any questions you might have about the new MasterCard registration fees or requirements. Bradley Ganzer can be reached at 763-367-6770 / Brad@IgniteMN.com / www.IgniteMN.com