A Simple Misunderstanding

Stephen Yagielowicz

In yesterday's article on whether or not accepting VISA was a good idea for smaller, "start up" pay sites, and if so, what the best ways to go about it were, I mentioned the message board thread that started the whole debate here at XBiz anew. Some of the posts on that thread, as well as comments I have privately received since, indicate a simple misunderstanding of my statements, which I'd like to clarify today:

I believe some of the misunderstanding emanated from the conclusion of a post I had made (much of which was summarized in yesterday's article): "Finally, consider that the new VISA regs apply only to 'high risk merchants' (like porn sites). If you go to ibill and say, "I want to accept VISA credit cards at" there's little doubt about your business - and the category you belong in. How er, "creative" can YOU be, especially if it saves you $750 — or at least buys you time:" A statement that some people believe was an encouragement to lie about your business — and nothing could be further from the truth.

As Mitch from Netbilling, as well as others, pointed out, "While you are correct in your statement about the registration fees only being required for "high risk" MCC5967 merchants, using a non-high risk account for a high risk business could be the end of your business. The bank under VISA and MasterCard's direction, can and will hold all of your funds indefinitely and blacklist you from processing with any 3rd party processor or getting another merchant account. We can setup non-high risk accounts in 48 hours with no reg fees. Even if you are selling adult videos, it is not high risk, only memberships and some other biz types. Please take this advice... DO NOT AVOID THE FEE BY LYING ABOUT YOUR BUSINESS TYPE. YOU WILL GET SHUT DOWN!"

And that's why today's article is so important: I don't want anyone to have a mistaken impression that by falsifying your business classification that this is an end run around the current set of VISA regulations, and while I was deliberately vague for a number of reasons, perhaps I should be a little clearer, in order to save someone from a potentially serious mistake — like committing bank fraud.

A Little Story
In the beginning, a sweet young lady with her own antique business obtained a merchant account to facilitate the buying and selling of collectibles, an endeavor which she's excelled at, and which still holds interest for her today. Somewhere along the line, this naughty nympho-brat decided "Hello, why don't I build a porn site, and make extra money selling pics and videos of what I like to do best?!?" Her friends thought this was a brilliant idea, and with a little encouragement, a star was born...

The obvious question then arose: "How can I accept membership payments from my site's customers?" Already having a merchant account and POS terminal, the decision was an easy one; and her transactions were processed through her existing means, under her mainstream company's name. This was started well (several years) before the new VISA regs were announced, and so there was no lying, fraud or deception involved — simply a process that made use of existing corporate assets for legitimate means without having to re-invent the wheel. If her merchant bank knew, or objected, they never informed her, nor of the VISA regs, an issue that isn't isolated.

And by 'not isolated' I mean, that as time went on, and the value of a secondary (3d party) processor that would handle customer service and other tasks became apparent, and another company (now related to hers, and also having a mainstream processing arrangement), said "Let's use my domestic 3d party processor to handle your site's membership subscriptions." Again, this was all well before the new VISA regs, and to this day, this couple has not been informed by their processors of any new regs — in fact, the only info they have ever seen on the subject has been from posts on these (and other) message boards; leading them to believe that clearly, the new restrictions were not "universal" — as was implied when the announcements were initially made.

While I am reliably informed that if these processors sent an official letter informing them of changes to their merchant agreement, and the requirement of paying a fee, that a check would be promptly written, and all would be well with the world. For now though, they operate under a policy similar to the one which allows fags in the military: "Don't Ask, Don't Tell." There is no 'deception' as their arrangements predated these new VISA regs by a significant amount of time, and they are still operating their "business as usual," but neither of these folks intend to send off a letter saying "We read on a Webmaster message board that we need to pay you $750, enclosed is our check — thanks!" either:

An Alternative
Talking to this young lady about the plight of newbie Web cam girls and the dilemma they faced in the current market revealed an alternate idea, though one that is not really suited to other than single model amateur site operations with minimal (but dedicated) membership bases: since the regs appear to be aimed at processing adult site membership subscriptions, why not offer the subscription as a "free bonus" with the purchase of an 'unrelated' item? "Buy a copy of my calendar and get a three month subscription to my Website for free!" They want to stay longer? Sell 'em a mouse pad. Many of these girls have a 'Wish List' — go trade your wishes for reality! The options are limitless, though some with vested commercial interests might opine otherwise:

Once again, there is no real deception involved here — if VISA allows 'unregulated' processing of certain categories of merchandise, while penalizing others, then play by their rules, but play their game well. When you can afford it, pay the fee as a cost of doing business, then write it off on your taxes. This is what I mean by being "creative" — although I think you're still better off going the AVS route as I had outlined yesterday. Whatever you choose to do, do it wisely, do it well. Good luck! ~ Stephen

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