Regulatory Issues to be Aware Of
There has been a lot of publicity in the press and on the Internet over the past several years regarding increased government oversight of business and business owners’ responsibility for fair and ethical practices toward consumers.
Regulatory mandates are now enforcing closure of merchant accounts for violations related to the following Acts and similarly related rules.
We urge you to educate yourself on these new enforcement trends and to, not only plan accordingly, but to ensure that your employees are also briefed on methods of proper conduct. We bring your attention to the following two highly publicized Acts.
Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)
UDAAP is one of the most talked-about compliance issues today. An unfair practice is one that harms consumers financially and that consumers cannot reasonably avoid. The harm does not have to involve a large amount of money; the law applies even to a small amount of monetary damage that many consumers experience. Financial product and service providers are not allowed to coerce or deceive consumers into making unwanted purchases. They are also not allowed to mislead consumers through specific statements or through a lack of clear and full disclosure. This includes hidden or confusing Terms and Conditions.
Restore Online Shoppers Confidence Act (ROSCA)
Targeted at merchants who sell goods on line, the Restore Online Shoppers Confidence Act prohibits any post-transaction third party seller from charging any financial account in an Internet transaction, unless the third party seller has disclosed clearly all material terms of the transaction and obtained the consumer’s express informed consent for the specific charge. (A third party seller is a seller who markets goods or services online after-the-fact of an initial—not related—sale and who was fed the “customer lead” by an initial merchant after the consumer made a purchase with that merchant. These have tended to be unauthorized transactions.)
All sellers/merchants must obtain the account numbers to be charged directly from the consumer and not from another entity. This Act prohibits initial merchants from disclosing purchasers’ financial account numbers or other billing information to third party sellers.
In addition, for all online transactions with a negative option feature (both initial sales and post-transaction sales), the Act requires the seller to disclose clearly all material terms, obtain the consumer’s express informed consent to the charge, and provide a simple means for the consumer to stop recurring charges.
Review and Monitor
We encourage you to review on a regular basis your policies and practices that relate to the above regulatory issues and make the necessary adjustments to keep your company and employees in compliance.
We further encourage you to monitor your On-line Reputation. This is important as escalating, unresolved, consumer complaints on the Internet, with the Better Business Bureau, the Ripoff Report and such could be grounds for termination of one’s merchant account.
Here are some additional resources for information regarding regulatory issues:
- Consumer Financial Protection Bureau (CFPB) regulations – this website provides information about CFCB regulations that impact a variety of types of business.
- Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) regulations – an overview of these regulations.
- Restore Online Shopper’s Confidence Act (ROSCA) – provides information regarding prohibited practices and requires disclosures for online merchants.
- Fair Debt Collection Practices (FDCP) – rules and regulations regarding debt collection practices.
The following are links to the websites of government and industry organizations that issue or oversee regulations related to the acceptance of credit card and other payments types by merchants.