The Underground Market of Sham Merchant Accounts
They are shadow companies, selling illegitimate “stealth” merchant accounts with all the phony information of a fictitious business; ordinarily, such businesses may probably only last for about 30-90 days before they fail. Red flags include requesting unusual documentation from vendors (e,g. a utility bill in another name), along with guaranteeing “100% approval” for impermissible industries or terms like upfront total payment. Authentically merchant account providers will verify business registration, check personal credit (for sole proprietorships), and gather a wealth of information about products. Fake account mills tend to have special relationships with “friendly banks,” but do not exist. The fallout can be catastrophic: processors end up blacklisting completely legitimate businesses because of being tied to deception applications, and funds frozen are usually never recovered.
Verifying Processor Legitimacy
It is always important to verify the provider registration through Visa/Mastercard (through their ISO listings) and local financial authorities. Real high-risk processors live within established places, have printed compliance, and have proof of banking partners. Ask for client referrals from similar enterprises-real providers guard relationships but will allow you to meet with existing merchants. Pass-through processors that don’t offer direct merchant account arrangements are not advisable since this is a modality that entails acquiring direct contracts with the bank. Payment facilitators (PayPal, Square) have agendas in terms of providing contracts and of course not working in merchant accounts. A good measure would be to consult a payment attorney to go through your merchant contract before you sign-it is around 500-1000, but avoids a lot of headaches later.
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