While the rules and uses for an individual's credit record are somewhat straight forward, and a number of organizations are established to help in the event of problems, the issue of bad credit records and how to clear them is much more cloudy for merchants.
   An individual's credit history can be obtained through one or all of the major credit reporting companies: Experian, Equifax, Trans Union and TRW. Larger merchants may have some information about them included in Dun & Bradstreet's files. But the merchant's history in the card payment industry is kept in the MATCH files, formerly known as the Terminated Merchant Files (TMF), which are administered by MasterCard and shared by Visa.
   Despite repeated attempts with a variety of MasterCard sources, the association would provide no information, and wouldn't confirm or deny information that Transaction World obtained from other sources.
   Visa was a little less secretive, but deferred questions to MasterCard because they are the association that administers the database.
   Technically, association members are required to report merchants for any violation of the merchant agreement, but some violations are more likely to be reported than others.
   The card associations also encourage 'matching' merchants for suspicious activity ­ even if it's not yet proven.
   "The card associations hold the acquiring bank accountable for the processing activity flowing through the merchant processing account," said Don Alcorn, President of Atlantic Payment Systems LLC, Rutland, Va., a consulting company that works with direct mail and Internet merchants. "Once chargeback levels increase and/or suspicious activity occurs, it is critical for business owners to resolve the matter at once. With delays, at some point, the acquiring bank runs out of options and is required to terminate and list the merchant and individual."
   However, not all merchants who could be put on the MATCH system are listed. Technically, a merchant who is a few dollars in arrears in payments could be in violation of the merchant agreement and should be put in the file. But the cost and inconvenience of doing so for a small amount may not be worth it for the processor, particularly if the merchant in question has a long, good business relationship with that processor.
   Therefore, each processor has his own tolerance level before he puts a merchant into the MATCH system.
   In addition to nonpayment of fees, another common violation of the merchant agreement comes from factoring, the practice of multiple merchants sharing a terminal, which is strictly forbidden in the merchant agreement. However, many new merchants may not be aware of the law, even though it's in the merchant handbook that they all receive (and many don't read thoroughly).
   If factoring is truly an oversight on the merchant's part, the processor may choose to forgo adding the merchant to the database if the problem is corrected.
   Merchants who aren't involved in face-to-face transactions (i.e., catalogue and Internet-based businesses) have a higher propensity to be matched, which should be expected because those businesses tend to be more volatile and risky than brick and mortar.
   Though the MATCH system protects acquiers/processors, not all of them choose to use it when accepting a merchant's business and not all processors check it immediately.
   If a merchant has been matched and applies at a new processor, the new processor can accept the merchant's business or tell the merchant they are not going to accept the merchant until the problem is corrected.
   Pulling a MATCH report before accepting a merchant's business can delay the application a day or more. Therefore, some processors will allow a merchant to go live immediately ­ in an authorization-only environment -- until they get the MATCH report. Others ignore the MATCH report altogether.
   "It's so competitive that processors are taking more and more risk to get accounts," said Michael Kopp, Chief Operating Officer for West Palm Beach, Florida's Electronic Data Resource (EDR).
   Once on the list, the only entity that can remove the merchant is the acquiring bank that initially placed the merchant on the list.
   If the new processor tells the merchant to return to the original processor to be removed from the MATCH file and the original processor refuses to do so ­ assuming there is no outstanding liability ­ the merchant can sue the original processor. There are even a few lawyers who specialize in these types of cases.
   Proper due diligence before adding a new merchant can save the processor plenty of headaches later. For example, out of 5000 merchants, EDR has matched less than 10 for excessive chargebacks and stolen cards, said Kopp.
   Most acquirers/processors will not accept a merchant who is on the MATCH file until the listing has been cleared by the prior acquirer/processor.
   Merchants must be notified that they are being put on the list, so it shouldn't come as a surprise to them, Kopp said. To ensure that a matched merchant doesn't try to circumvent the system by simply changing the name of the business or changing from a street address to a P.O. Box, the MATCH files include business name, corporate address, tax identification number, telephone number, social security and individual name(s), which could include one or more executives. This enables a processor to cross-check the database to further ensure that he isn't accepting a risky business or merchant.
   It's in the ISO's interest to keep merchants off the MATCH file, because once on, it can be very difficult to get off.
   The acquirer that puts the merchant on the file is the same one that must take him off, but that may be much more easily said than done, according to Don Alcorn.
   First, the merchant needs to determine which acquirer actually put him on the list. While that may seem simple enough at first glance, there are several potential problems.
   When the merchant is added to the list, the acquirer can include information including name of the business, address, company officials, etc. This information helps protect acquirers from accepting business from a merchant who simply changes the name of his business or from a business owner who starts successive businesses, only to habitually default on his merchant agreement.
   However, company officials may be added who weren't responsible for factoring, latepayments or other problems that resulted in the business going on the MATCH file, meaning that person is still on the file even if he tries to start up a new company, with nothing to do with the old one.
   Though it might seem that a simple phone call or letter could clear up the matter in such a situation, finding the person or the acquirer itself may be much more difficult that one might think. For example, several small New England banks became part of Bank of Boston a few years ago, then Bank of Boston became part of Fleet Bank. The aspiring merchant may have been added to the database by one of the community banks that no longer exists as a separate entity. Fleet may be reluctant to remove the merchant because it was not directly involved in adding the merchant to the file. Fleet is only one example. Bank of America, Wachovia, Chase and other acquirers have grown, in part, through numerous acquisitions in the last few years.
   Similarly, there was a person with the original acquirer who made the decision to add the information to the database. That person may no longer be with the acquirer, regardless of whether the acquirer has become part of another company or has gone out of business altogether.
   In such an instance, the merchant may be referred to MasterCard or Visa, which would refer him back to the acquirer and the person making the decision, which may be unreachable for the reasons mentioned earlier ­ so trying to clear up a MATCH file can be extremely difficult. Unlike bankruptcies and other blemishes on a consumer credit record, the MATCH information doesn't automatically expire after a certain amount of time.
   "We have always found that correcting the cause of consumer disputes, chargebacks and suspicious activity is a less expensive and more permanent choice than being put on the MATCH file," Alcorn said. "Every merchant, once facing the difficulty of being 'listed', wishes he had been as forceful in correcting the practices as he was in resisting the credit card rules. Termination and listing can cost him his business."