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Can businesses be grandfathered into merchant processors

How do some businesses get away with regulations and still process?

7:10 pm on Jul 29, 2014 (gmt 0)

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Question here. Let's say that that a company called "BigtimeCredit" has been operating for years now and offers "credit repair services" which was considered a low risk service to banks when it first came out. Let's say this was simply because banks were naive at the time and unsure of how the market would accept such a service. As time went on, banks get more and more charge backs from disgruntled customers whose credit wasn't repaired, and now banks look at the "credit repair services" industry as high risk.

Yet, BigtimeCredit signed up with their merchant processor years ago with great low risk rates (1% to 3% per transaction) and has kept their charge back rate really low too. As of today, BigtimeCredit continues to process "credit repair services" with their original low risk merchant processor.

Now, let's say some guy named Chuck starts up ChucksCreditRepair and wants to offer "credit repair services" too, but Chuck is told by the same processor that BigtimeCredit uses that "credit repair services" is considered high risk and the processor can't take him. Why the double standard?

How come BigtimeCredit is not flagged due to changes made in the industry? Did BigTimeCredit signing up early on, protect them from changes to rules and regulations? I don't see how but maybe some merchants are somehow grandfathered in?

I notice a lot of high risk merchants that have operated for years using the same low risk processor. When new people want the same treatment, they are pushed away. It baffles me.

The merchant processing industry seems to be very fishy IMO.
7:50 pm on July 29, 2014 (gmt 0)

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There's a lot to be said for history, "BigtimeCredit" may have built a good reputation with their merchant account. You might find that they would have a problem changing merchant providers if they wanted to same as a new company would have a problem getting an account.
1:47 am on July 30, 2014 (gmt 0)

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After talking to more and more processors, I agree with @Shepherd. High risk or not, banks are less likely to take a chance on a business that brings in no money (ie: a new business with no sales) vs. a business with guaranteed cash flow because you can balance the risk with the reward.

I've been personally burned by merchant processors who've promised me that my new high risk venture could land a processor while still knowing that I had zero sales to account for.

In hindsight, they should have told me the truth instead of wasting my time by having credit checks pulled on me and my company for an account that was never going to get approved.

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