Recently, the 'cancelled merchant accounts' issue has started up again, with a couple of Suppliers reporting that their credit card processors have deleted their accounts due, this time, to online tobacco sale issues.
Can we point out the following facts please:
1. This is a USA-only issue involving two things: the PACT Act, and risk reduction by 3rd party card processors.
2. The PACT Act prohibits mail-order sales of cigarettes. It does not prohibit mail-order sale of tobacco. Pipe tobacco and various other types are not covered by the PACT Act - it only covers cigarettes. It certainly does not cover e-cigarettes.
3. Visa and Mastercard do not prohibit tobacco sales - it is a significant part of their business. However, they would not support a 3rd party processor who has accounts (businesses) that sell tobacco cigarettes via mail order, as this is illegal due to the PACT Act.
4. 3rd party card processors (merchant account operators) assign a risk rating to types of products - in other words they have data that tells them the likelihood of problems with accounts (i.e. account holders, not sales) that deal with particular groups of products. They seem to have data that indicates that sellers of tobacco may default more than other businesses, therefore that area has more risk. This means that they may delete accounts of that type, once identified, or due to changing operational procedures at the processor.
It is also a fact that such processors are far more likely to delete dead accounts or low-volume accounts than busy and/or large ones. The biggest e-cigarette businesses, after all, turn over tens of millions of dollars of e-cigarette / nicotine / e-liquid credit card business a year, and make no secret of the fact.
5. The FDA has not sent any letters to credit card processors about anything other than tobacco cigarettes, since stating or implying that anything other than tobacco cigarettes are covered by the PACT Act, and specifically e-cigarettes, would be an outright lie and open them to civil action.
6. There are several merchant account processors who will be happy to take your business, if you are an e-cigarette vendor. Please see the Services for Suppliers forum, and discussion within the private Supplier forums.
7. This is not a threat to internet e-cigarette sales, at this time, as e-cigarettes are clearly not covered by the PACT Act as it doesn't even cover all types of tobacco, never mind nicotine.
8. The pharma industry / FDA may well attempt to have the PACT Act amended, but there will be considerable notice of that, and we can imagine that it will be fought against with every last cent of the e-cig trade and community, since if it succeeds, e-cig sales will be next to impossible. That is at least two years away at this time.
What we are looking at here is a couple of dead or low-volume accounts being closed by 3rd party processors who are either reducing risk or moving out of that product area.
Can we point out the following facts please:
1. This is a USA-only issue involving two things: the PACT Act, and risk reduction by 3rd party card processors.
2. The PACT Act prohibits mail-order sales of cigarettes. It does not prohibit mail-order sale of tobacco. Pipe tobacco and various other types are not covered by the PACT Act - it only covers cigarettes. It certainly does not cover e-cigarettes.
3. Visa and Mastercard do not prohibit tobacco sales - it is a significant part of their business. However, they would not support a 3rd party processor who has accounts (businesses) that sell tobacco cigarettes via mail order, as this is illegal due to the PACT Act.
4. 3rd party card processors (merchant account operators) assign a risk rating to types of products - in other words they have data that tells them the likelihood of problems with accounts (i.e. account holders, not sales) that deal with particular groups of products. They seem to have data that indicates that sellers of tobacco may default more than other businesses, therefore that area has more risk. This means that they may delete accounts of that type, once identified, or due to changing operational procedures at the processor.
It is also a fact that such processors are far more likely to delete dead accounts or low-volume accounts than busy and/or large ones. The biggest e-cigarette businesses, after all, turn over tens of millions of dollars of e-cigarette / nicotine / e-liquid credit card business a year, and make no secret of the fact.
5. The FDA has not sent any letters to credit card processors about anything other than tobacco cigarettes, since stating or implying that anything other than tobacco cigarettes are covered by the PACT Act, and specifically e-cigarettes, would be an outright lie and open them to civil action.
6. There are several merchant account processors who will be happy to take your business, if you are an e-cigarette vendor. Please see the Services for Suppliers forum, and discussion within the private Supplier forums.
7. This is not a threat to internet e-cigarette sales, at this time, as e-cigarettes are clearly not covered by the PACT Act as it doesn't even cover all types of tobacco, never mind nicotine.
8. The pharma industry / FDA may well attempt to have the PACT Act amended, but there will be considerable notice of that, and we can imagine that it will be fought against with every last cent of the e-cig trade and community, since if it succeeds, e-cig sales will be next to impossible. That is at least two years away at this time.
What we are looking at here is a couple of dead or low-volume accounts being closed by 3rd party processors who are either reducing risk or moving out of that product area.
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