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Credit and Risk 1 Objectives By the end of this module, you will be able to: 2 • Explain the components of the credit approval process • Utilize the Risk Acceptance Grid to identify necessary paperwork for approval • Identify the difference between a Chargeback and a Retrieval Request Reasons for Credit 48 Hour Payment 2 business days from settlement to deposit in Merchant’s DDA Additional time between merchant receiving money and TransFirst getting paid Floating Interchange Costs Issuing Banks Fees are taken out before TransFirst is paid Only bill merchant once a month Chargebacks Cardholder or Issuing Bank is disputing a transaction Card Not Present merchants more susceptible 3 Liability Liability for a Merchant account Merchant’s credit is investigated for approval or denial Financial responsibility assumed before receiving payment Advocate for collection issues in a chargeback situation Monitor potential fraudulent transactions 4 Responsibility If STW Holds Liability Approve or Deny Questionable Merchants Handle collections for chargebacks Perform Risk Assessments and Transactions Inquiries 5 Credit/Risk Grid 6 Risk Categories: Low Medium High Medium/High with certain characteristics Government Entities Not for Profit 6 4 •Smaller Ticket • Merchant Application Packet •Low Volume • • Premise Contact Inspection information •Mostly Smaller Swiped Ticket •Good Lower Credit Volume More CNP •Same as Medium Future Delivery •Almost all CNP Guarantee • Personal 501c(3) form from IRS • Marketing Materials • 2 Trade References • Most recent 2 years Business Financials SSN not required for: business less than one year, Not for Profit •In Business Plan and/or pro forma •High Volume financial statements Government Entities •Future Delivery • Proof of Property Publicly Traded Corporations •Future Delivery •Large Ticket •Specific SIC Codes Underwriting Gold Merchant Level All merchant applications submitted through the Gold Merchant Level approval process In some cases, due to poor credit or other red flags the merchant will not qualify. At this point all hope is not lost 7 4 Silver Program Merchant Level Credit Program: • Very high risk or negative credit • Specific criteria is needed • Stricter guidelines • More Restrictive • Addendum to Application Rule of thumb: Attempt Gold, Attempt Silver Underwriting STW Accept Liability STW has the option to accept liability for merchant approval if declined by TransFirst If no solution can be found, TransFirst contacts the merchant and takes responsibility for the decline 8 Underwriting Exclusion List Merchants will not be set up Prequalification Form Inquiry for questionable merchants 9 Risk Department TransFirst looks to Mitigate Risk All transactions processed by our merchants come in large files to the Risk department every morning. A Risk investigator is assigned to look over the batch for inconsistencies and fraudulent transactions. One way TransFirst mitigates the risk is by rejecting transactions that should not have been processed, prior to payment to the merchant. 10 Chargeback/Retrieval Chargeback What is a Chargeback? A dispute of a transaction Who can submit a Chargeback? Cardholder Issuing bank Who Notifies the merchant? TransFirst How? Written Letter 11 Retrieval What is a Retrieval? An inquiry of a transaction Who can submit a Retrieval? Cardholder Who Notifies the merchant? TransFirst How? Written Letter Chargeback/Retrieval The Difference is: A merchant is debited the transaction amount on a chargeback A retrieval only requires a response with verification of the transaction Failure to respond will result in a Chargeback 12 Review 13 1. Three reasons TransFirst does a credit check on new merchant accounts? 48-hour payment Floating Interchange Costs Chargebacks 3. What are two reasons a transaction is reviewed by the risk department? Higher than Average Ticket Over Monthly Volume 2. Name 2 of the Risk levels a merchant can be classified as by Credit? Low Medium High Medium/High with certain characteristics Not for Profit Government Entities 4. How does TransFirst notify a merchant of a chargeback or retrieval? By Letter, mailed Credit and Risk 14