Selling CBD and Hemp Products: Tips on Avoiding Processing Failures from Mile High Merchant Processing
Q: What causes credit card processing to get shut down for CBD or hemp-related companies?
A: When a company signs up for credit card merchant processing it is often engaged with an independent contractor who is not affiliated with the actual merchant processing company. The independent contractor and the merchant processing company act separately and have different interests. The merchant processor does not necessarily know what its being represented by the independent contractor selling the processing services. This can create a few problems, the most significant of which is that they will almost always tell the merchant that they are fully disclosed as being a qualified seller of CBD or hemp (defined as containing 0.3% THC or less). However, this is not the case with representatives of all merchant processors who do not have SIC approval or “standard industry code” approval for CBD and hemp from MC/VISA.
Q: Why is this important?
A: If a merchant is not being specifically coded as a “CBD” or “hemp” company then they are being coded as something else. This is called “masking” the identity of the merchant and most often leads to cancelation of merchant services as well as legal issues.
So, for example, when MC/VISA discovers that the merchant it is processing as a “florist” or a “diet supplement” company is actually CBD or hemp seller, the processing contract is canceled. Typically, the merchant processor or the contracting representative are not liable. But, the merchant can and often is held liable for the inaccurate disclosure.
Q: So, just what is at risk for companies who are not properly coded?
A: The resulting impact on the merchant can be devastating and costly: the merchant may be required to undergo state and federal regulatory scrutiny as well as forced to shut down.
This is problematic as it creates a negative mark on the processing record of that merchant and future processing may be limited and expensive. Second, the merchant may have funds held indefinitely by the bank clearing the transactions. This can take months and even years to resolve, incurring significant legal fees to the merchant. Third, in some cases the merchant can be placed on a “terminated merchant file” or TMF and may be banned from obtaining another merchant processing account.
Q: What steps can be taken to ensure banking safety?
A: The alternative to engaging in risky merchant processing arrangements is to: 1) know who and what to ask of your merchant processing contractor; 2) obtain written assurances that your business is accurately represented and disclosed for banking purposes; 3) your business is being processed as a qualified CBD or hemp seller.
CBD and hemp businesses can and are obtaining approved SIC code identification for merchant processing through qualified merchant processing representatives. Do your homework and secure your business within the CBD and hemp industry.
About Mile High Risk:
Mile High Risk Merchant Processing is a qualified merchant processing representative that fully discloses CBD or hemp businesses for the purpose of obtaining a merchant processing account. With Mile High Risk Merchant Processing, the banking signs off on CBD and hemp businesses with full disclosure and approval. Mile High Risk is the only company that has achieved this level of approval within the merchant processing industry.
For more information contact: firstname.lastname@example.org or call George at 720-822-3831.