Who regulates merchant accounts?

Who regulates merchant accounts?

As the owner of a business that accepts credit cards or is contemplating accepting them, you are aware that a merchant account is needed for credit card processing. However, there are many regulations that govern your merchant account for which your payment processor is largely responsible. Now it's time that you learn about the key government players that regulate your payment processor and merchant account.

Federal Deposit Insurance Corp.: The FDIC is a government agency that regulates the functionality of banks. With its primary focus on banking institutions that offer deposit accounts, the FDIC has a hand in regulating your merchant account. FDIC's division of supervision and consumer protection (DSC) is the entity that monitors and examines them. The primary focus is to make sure that credit card processing is handled in a secure manner to protect consumer information and privacy.

Federal Trade Commission: Over the last seven years, the FTC has taken a larger role in regulating your payment processor's activities. Several lawsuits initiated by the FTC were filed against payment processors for fraud-related incidences -- not just for fraud committed by the payment processors themselves, but also because of the fraudulent activity of merchant account holders. The FTC Act and the Fair and Accurate Credit Transaction Act (FACTA) are the acts governing your payment processor and have helped the FTC win each case.

What this means for you as the merchant account holder is that if your payment processor is not monitoring the activity trends of its various account holders and flagging them for suspicious activity, you may need to look for another payment processor. Some payment processors have gone out of business as a result of these lawsuits.

Antitrust Division of the Department of Justice and Congress: The Antitrust Division is primarily responsible for making sure there is a level, competitive playing field within each industry. It is because of this division that you are able to shop around to find the best merchant account available for your business. Congress gets involved to pass new legislation to help out the industry when it believes the need arises.

These government entities are the primary regulators of your merchant account. With the FTC's aggressive stance with payment processors in recent years, it is in your best interest to find out if your credit card processing is being handled with due diligence. Do not be afraid to ask your payment processor about its efforts to maintain security and prevent fraud. Remember, if your payment processor is forced out of business, you lose your merchant account.

Published: June 8,2023