Merchants Are Running Out of Time to Prevent IRS Backup Withholding.

This is the time of year that credit card processors notify merchants for whom they do not have correct Taxpayer Identification Numbers (TIN) on file. Should you receive such a notice it is vitally important to your business that you contact your processor immediately.

As I covered in this post last year, http://brswitzer.blogspot.com/2012/08/tax-identification-numbers-and-your.html, having an incorrect TIN on file with your processor results in backup withholding, whereby the processor withholds 28 percent of all your credit card volume by order of the IRS. Fixing the TIN after withholding starts doesn't help- it will not end until you file a tax return and the IRS determines you are eligible for a refund.

In September and October the IRS requires processors to send "B" notices to affected merchants listing the steps they need to take to update their account information. The "B" notice will include a Form W-9. The Processing company has just 30 days from when they are notified by the IRS to get a corrected W-9 back from the merchants, after which they are forced to start backup withholding.

You should always read any communication from your processing company, but it's especially important during these two months of the year. If you receive notice that your TIN is invalid or doesn't match what's on file with your processor, contact them and update your account immediately.

Enormous Double Billing Error Affects Companies Across US

First Data Corp., the back end platform for thousands of credit card processing companies, revealed today to it's processing partner companies that they duplicated the ACH payment for July processing fees on one of it's largest  platforms.

First Data is still reviewing to see how many merchants are affected, but the number could be in the hundreds of thousands. First Data is also explaining that the ACHs may not be for the same amount. For instance if a merchant owed $200 for their July processing the first ACH would be $200 and the second $203 or some other close but not exactly the same number.

The company hopes to have the reversal file built today. Once the file is built they expect to be able to deposit refunds within 24-48 hours.

Reportedly the company will be working with any merchants that incur NSF charges as a result of the incident. They will require documentation and ask that you contact your processing company if this has occurred.

The Ten Most Easily Stolen ATM Card PINs

Credit and debit card fraud affects millions of Americans every year.  Your first line of protection against fraud is your PIN, and depending on how much thought you put into your personalized number, you could be at greater risk than you realize.

A new study from DataGenetics says that card thieves are able to successfully guess more than 25 percent of stolen card PUN's within 20 attempts. The study lists the most used PIN's. And because they are the most commonly used PIN numbers, they are by default the least safe.

The 10 most used PINs:

  1.  1234

  2.  1111

  3.  0000

  4  1212

  5.  7777

  6.  1004

  7.  2000

  8.  4444

  9.  2222

10.  6969

By the way, the study said the least used PIN is 8068.

Are you using SMS (text) Messaging to Engage Your Customers?

Email has been a transformational way for business owners to keep in touch and send offers to customers. However, mobile is emerging as THE channel of tomorrow, and merchants need to be able to use it to improve brand awareness and engage with new and prospective customers.

According to a 2012 Pew Internet and American Life research Report, the majority  (a whopping 82%) are sending and receiving text messages on a daily basis. Naturally, with this huge increase in text messaging, SMS (Short Message Service, or texting) campaigns present a way for businesses to reach customers on the channel they use most frequently to interact with family and friends. It has become one of the most powerful and effective new ways to activate and engage customers.

Retailers have traditionally built foundational relationships with their customers with email- but you should know that text messaging is an up-and-coming platform that you can use to maintain regular communication with your customers. By implementing a mobile strategy that appeal to customers who are familiar with and regularly use mobile, you can broaden your reach and appeal to a wider audience. By sending instant and relevant messages to customers and providing them with a strong call-to-action, businesses can bolster their brand as well as improve revenue.

SMS allows businesses to spread awareness of their mobile presence and keep customers engaged by offering coupons and initiatives.  You can also increase loyalty and increase future purchases by engaging with your customers by sending alerts on new products and sales. SMS campaigns that provide consumers with timely offers and insider brand information can turn casual shoppers into loyal customers and brand advocates.

With the steadily growing number of customers using mobile to access the web, in addition to the number of customers browsing and purchasing through mobile storefronts and retail applications, SMS is a key tactic you should incorporate to boost your marketing strategy.

Getting Your Share of the Credit Card Class Action Settlement

Visa and MasterCard have recently reached a proposed settlement agreement that  allows  merchants to receive a portion of the $7.25 billion total proposed settlement amount. The settlement is the result of a class action lawsuit brought against Visa and Mastercard by hundreds of businesses across the country. The lawsuit claims that merchants paid excessive credit card fees for accepting Visa and Mastercard due to an alleged conspiracy by the card companies.

Any merchants who accepted Visa or MasterCard between January 1, 2004 and November 28, 2012 are eligible to receive a portion of the Cash Fund based on the volume that was processed in this time frame. Merchants who are eligible to receive money from this fund will be able to collect it once the settlement is approved during the Fairness Hearing, scheduled for  September 12, 2013, in New York. 

There are two settlement classes. The first is a more than  six billion dollar fund set aside for anyone that accepted cards during the above time frame. An individual merchant's settlement amount will be 10 basis points, or ten one hundredths of one percent (.0010 percent) of the volume the merchant processed during the time frame.

So if Bob's Diner processed $10,000 a month between January '04 and the end of November 2012, Bob would take $10,000 X 107 months, for a processed amount of $1,070,000. Ten one hundredths of a percent of that figure is $1070- Bob's settlement payout. 

The second fund is open to certain merchants that accepted Visa and Mastercard and who  paid interchange fees during an eight month period that starts on July 29, 2013. This fund is estimated to be $1.2 billion.

A website has been set up at paymentcardsettlement.com for merchant informationand to file claims. 

Two very important points about the settlement- the first is its scope. This is FREE MONEY for anyone anywhere in the country that accepted Visa or Mastercard. All that is required is completing some paperwork and following the guidelines established on the settlement website. Nonetheless, fund administrators expect fewer than thirty percent of eligible merchants will claim their settlement share.

Secondly, dishonest processing companies are already trying to mislead merchants in regards to the settlements.Using phone calls, emails and faxes they promise they can help you get a huge settlement if only you let them take over your processing.

Each merchant's settlement amount is what it is. You plug your numbers into the formula and viola; the amount that results is your payout, and no one can change that.

So check out the settlement website, spend an afternoon totalling up the amount you processed over the settlement period, and start the paperwork to receive your funds. And pay no attention to the dishonest processing companies that give this industry such a bad name.

Feel free to contact me with any questions, concerns or problems you have concerning the settlement, or anything else concerning your businesses electronic payments.

Visa Allows Surcharging; Why You Should Think Twice Before You Surcharge

Beginning Monday business owners  are going to be deluged by sales people offering to make their credit card processing more profitable by adding 'surcharging' to their processing account.

And while it's true that as of Monday Visa has changed it's rules so that it is no longer against the card rules to add surcharges to credit transactions- to add a $1.00 fee to each card you process to cover your processing costs, for example- it is not a cut and dried situation.

First of all, surcharges are illegal in Kansas and Oklahoma by state law. Secondly, Visa's instituted  a myriad of rules and regulations that you must follow if you are going to add surcharges- it can only be done on credit transactions, not debit, you have to follow guidelines that tell you how much you are allowed to surcharge, and several others. The regulations that accompany surcharging are complicated, and I suspect that Visa will be watching very closely for a few months and coming down hard on violators, whether they intended to break Visa's rules or not.

And thirdly, I would urge you to really consider whether you should be surcharging at all. Your customers are not going to like it. Unless you think it wise to anger a broad section of your customer base you may not want to participate.

If you genuinely feel you are paying too much for your credit card processing and have to recoup some of those costs (and if that is the case you need to redo your processing agreement) there is a better option- you can always offer a small cash discount. That will encourage more customers to pay with cash, and allow you to cover some of the costs accrued when customers do pay with credit. (Just remember to adjust your pricing accordingly.)

If you are in a state where surcharging is illegal and someone claims it isn't or has a way to get around the law, contact me immediately. I'll get you the law's title number and exact wording- you don't want to be breaking the law. And if anyone has any questions or concerns about the rules and regulations that Visa has in place, feel free to contact me anytime.

Barnes and Noble Reports PIN Pad Fraud at 63 Locations

Barnes and Noble Inc. reported Wednesday that a "sophisticated criminal effort" was able to tamper with 63 PIN pads in nine states. The company indicated that in addition to personal identification numbers, debit and credit account data may have been compromised.

The chain discovered the breach more than a month ago and promptly disconnected every PIN pad in all of it's nearly 700 stores. They said the held of disclosing the breach on the advice of federal authorities, who are investigating.

"Barnes and Noble has completed an internal investigation that involved the inspection and validation of every PIN pad in every store," the company said in a press release. "The tampering, which affected fewer than 1% of PIN pads in Barnes and Noble stores, was a sophisticated criminal effort to steal credit card information, debit card information, and debit card PIN numbers from the customers that swiped their cards through PIN pads when they made purchases."

The New York Times reported a senior company executive said some customers had unauthorized purchases on their credit card accounts.

Barnes and Noble did not say specifically how the pads were tampered with. "The criminals planted bugs in the tampered devices, allowing for the capture of card and PIN numbers," the release said. The bugs might have been razor thin devices with a chip and an antenna that captured the PIN numbers as they were entered on the pads.

Criminals have used such methods before, according to technology analyst Avivah Litan. "Its not that hard to plant them." she added. "Its pretty easy to distract a clerk or find an unattended terminal."

Steve Elefant, a credit card industry consultant, theorized another way the fraudsters could gain access to the PIN pads. Since much of today's payment hardware is tamper resistant a likely scenario is the criminals replaced PIN pads with what he called "malicious PIN pads" that captured customer data. Fraudsters often do this by sending someone dressed as a technician out to a store claiming that the company is repairing, replacing or upgrading terminals.

However the fraud occurred, there is no doubt Barnes and Nobles has a hard road before it. In addition to law enforcement the company said it is working with payment card networks, banks and card issuers to identify accounts that may have been compromised. Most certainly Barnes and Noble has already been or will soon be declared out of compliance with the Payment Card Industry (PCI) data security standards even if it was compliant on its last quarterly assessment. They are looking at non-compliance fines in addition to breach related fraud and card re-issuance reimbursements sustained by card issuers. They will also have to go through a re-validation process to regain PCI compliance.