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  1. #1
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    New Changes From Visa & MC that have Drastic Effects on Our Entire Industry
    Hello Everyone!
    Our company is a new member here though we are not new to the industry as individuals. There are new changes issued from Visa & MC coming down the line that we thought everyone should be aware of. As many of you probably know MC ran a sting operation from 12-31-09 through 01-20-2010. During this time period thousands of Merchant Accounts were closed for various reasons but mostly due to the sharing of Credit Card Data and unauthorized use of credit cards in fraudulent transactions. The Continuity programs were hit the hardest by this. Several Companies that we know of were slapped with Million Dollar fines from MC. This was just the beginning. Visa came out with an Official Statement a few days ago. In this Statement they singled out many of the free trial offers marketed online. The consequences for many of the companies running high Chargeback Rates are severe. An acceptable chargeback rate with Visa & MC is typically less than 1% and the usual chargeback fee is $35. Most of these types of offers are lucky to run at a 3% chargeback rate for various reasons. I will be posting Visa's Official Statement on our blog in the next couple of days. I'll keep this thread updated with a link once it's available. Back to the topic at hand though. Any offer that is running over a 1% chargeback rate will now be in the Super High Risk category which means the chargeback fee will now be $100 per transaction. Think about the consequences this will have on all of us. This means that most of those Easy to convert offers that have made many of us lots of money are in deep trouble. It is going to be much safer for most of us from here on out to run the lower EPC compliant offers. There will be many more companies that go out of business because of this. This is not a bad thing in many ways. It is going to require all of us to step up our game and make sure we are in line with Visa, MC, and FTC guidlines. It will require all the CPA Networks out there to perform more due diligence on each of the offers they are promoting to us. It is also going to rid our industry of the crap offers that don't deliver as promised. I hope everyone that reads this will share this information with their colleagues and friends. This is going to be a big deal to us all. Good luck to everyone and thanks for your time!
    Ben Neil

  2. #2
    SEO: A Specialty - Web Design: Slow or outsourced andbeyond's Avatar
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    Do you have a link to this story?

  3. #3
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    I will post up a link to our blog with the statement from Visa shortly but the rest of the story is not published anywhere that I know of. We have many advertisers and Friends in the industry that this happened to. We are working on the blog as we speak so I'm hoping to be done with it over the weekend. I'll post up again with that link when it's finished.
    Thanks
    Ben Neil
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  4. #4
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    What anybeyond said.

    "Visa came out with an Official Statement a few days ago."

    Just link straight to that, because I can't find it. And there is no need for:

    "I will be posting Visa's Official Statement on our blog in the next couple of days. I'll keep this thread updated with a link once it's available."

    When we can get it straight from them.

    Really no affect on me since I work mainly with more traditional affiliate networks and it's good if it knocks some crap out.

  5. #5
    ABW Ambassador
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    [QUOTE=ACME AFFILIATES;1012441]I will post up a link to our blog with the statement from Visa shortly but the rest of the story is not published anywhere that I know of. We have many advertisers and Friends in the industry that this happened to. We are working on the blog as we speak so I'm hoping to be done with it over the weekend. I'll post up again with that link when it's finished.
    Thanks
    Ben Neil
    (removed)

    No, you won't. We don't allow posts for the sole purpose of driving traffic to other sites. And we have rules against adding manual sigs. I removed the other ones you added as well.

  6. #6
    Defender of Truth, Justice and the Affiliate Way
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    JMO, but the issue here should not be about a link to a blog, but rather everything else posted.

    I lean towards it's true considering all the recent fallout in the CPA world because of Visa/MC's stance on rebills. I'm thinking this is connected with the rebill stuff??? Lots of offers got pulled immediately from networks because VISA/MC said they weren't going to be doing those due to the high fraud rate. Put a bunch of hurting on lots of people.

    All this impacts CPA affiliates more so than traditional affiliates. Although it is one of the reasons some major CPA networks are making a play at more actively recruiting traditional big brand merchants. So in that sense (if they are successful) then it could impact traditional affiliates. Hell Hydra just publicly terminated "80%" of their affiliates to make the point to big brands they've gone "clean." That's another story.

    There has been HUGE money involved in these types of offers and promotions being impacted.

    Personally I feel NO sympathy whatsoever. My feelings are summed up by this statement:

    "It is going to require all of us to step up our game and make sure we are in line with Visa, MC, and FTC guidlines."

    Maybe if that had happened from the beginning then it wouldn't be such a sweat. Oops...gotta mislead the consumers a bit to make that kind of money though. Bottom line is that a high risk game has been being played for a high payout. It's coming to an end.

    " It is also going to rid our industry of the crap offers that don't deliver as promised."

    It's going to help rid our industry of crap offers that take advantage of CONSUMERS. Again something that is giving the "affiliate marketing" industry a black eye. Others don't outside our industry don't get the difference between CPA Networks and traditional affiliate marketing.

    Unfortunately it's being cleaned up by outside entities with the power to regulate and not coming from within our own industry.

    "This is going to be a big deal to us all."

    It's only going to be a big deal for those who played in that sandbox. You want the quick, fast, high money you take a risk. And you occassionally get burned. It is not a sustainable model.

  7. #7
    Beachy Bill's Avatar
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    Actually, it sounds like a rather good thing.
    Bill / Marketing Blog @ 12PM - Current project: Resurrecting my "baby" at South Baltimore..
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  8. #8
    Kung Fu Master Eathan's Avatar
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    I'm sorry if I sound callous, but this doesn't bother or affect me. A 1% chargeback rate is absurd. I'd be concerned with .1%.

    I've never touched these types of offers, but I've worked in higher risk industries, and even high risk processing. In my experience there are reasons the rates and reserves are so high. To hear about offers running at 3% chargeback rates just makes me shake my head in wonder.

    Why on earth should that be let to continue...?
    Eathan Mertz

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  9. #9
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    I don't know if this will impact affiliate marketing or simply rid the industry of fraudulent offers, but what's interesting is how Visa has decided to handle it. Searching the web won't reveal the bulletin ACME spoke of and you won't find find any articles on Visa's new stance (until after this post) because it was a private bulletin that was sent out to merchant account providers... not the merchant's themselves.

    I've added the bulletin to this post. It was forwarded to me this morning by a merchant account rep. Download it and read it. It's an interesting bulletin.

    This isn't the first time Visa, Mastercard or the FTC have been involved together to rid an industry of fraud. They've cleaned up the adult industry, gambling, travel and now are working on a small segment of CPA marketing - certain continuity offers.

    Specifically:
    • Acai or health-related teas
    • Teeth whitening products
    • Colon cleanser and other detox products
    • Glucose strips
    • Internet-based work-from-home plans
    • Services offering government monetary grants or other ““business opportunity”” schemes


    All in all, that doesn't really affect the majority of affiliates, just CPA affiliates as Kellie has already stated. There are a lot of continuity offers that are still solid and not every merchant / advertiser selling products in those categories are bad companies with "fraudulent" products.

    As for chargeback rates - they are on the rise for all internet transactions. The Wall Street Journal came out with an article last May (2009). Here's a couple of quotes from it I found interesting.

    "Since the markets tumbled last year, Ice.com says its rate of suspected friendly fraud has tripled, while Expedia says it's up 50%. Athletic shoemaker K-Swiss Inc. says it's seen suspected friendly fraud rise 10% since January."

    "Photo-equipment supplier Calumet Photographic Inc. says it averages about $130,000 a week in fraudulent orders through its Web site. About 30% of those are friendly fraud, while the rest are traditional frauds with stolen credit cards."

    You can read the whole article here: http://online.wsj.com/article/SB124329230494652391.html

    In their definition of friendly fraud they cite "Chargebacks". It seems people are now buying things knowing they're going to chageback on the item since the credit card companies and the FTC backs the consumer rather than the business selling the product. I don't have a problem with that stance but as most of you know, many banks with online banking have made charging back simple. Most banks now have an online interface and buttons next to the charges that say "Dispute Payment". A portion of consumers are apparently finding this too tempting and Friendly-Fraud is on the rise. Google it and you'll be surprised just how widespread it is and it's not just found within the industries Visa listed above. It's everyone selling online.

    You can check out the wikipedia's page too:

    http://en.wikipedia.org/wiki/Friendly_fraud

    Bottom line is that this all may not affect most of us directly but it has the possibility to create new legislation especially with congress members pushing to increase regulation and taxes. Those are things that will affect all of us. It's just too early to tell if the effects will be all good, partially good, kinda good or down-right bad... none of us really know. What we do know is that Visa and Mastercard are monitoring all online sales and any company that has issues now face potentially disastrous fines.

    How's that for a first post? LOL
    Attached Files Attached Files
    Last edited by socializer; April 10th, 2010 at 06:38 PM.

  10. #10
    Moderator MichaelColey's Avatar
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    Quote Originally Posted by ACME AFFILIATES View Post
    Think about the consequences this will have on all of us. ... It will require all the CPA Networks out there to perform more due diligence on each of the offers they are promoting to us. It is also going to rid our industry of the crap offers that don't deliver as promised. ... This is going to be a big deal to us all.
    It's not a big deal to me. I avoid those scammy offers and the CPA Networks that facilitate them.
    Quote Originally Posted by Bill View Post
    Actually, it sounds like a rather good thing.
    Totally agree.
    Michael Coley
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  11. #11
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    One guru on merchant account changes
    Mike Hill one of the gurus who regularly speaks about marketing ethics gave his slant on the changes: mikehillsblog.com/yeah-visa/

    He posted a copy of a letter from an un-named merchant account provider:

    DIRECT RESPONSE BEST PRACTICE GUIDELINES FOR MERCHANTS

    TRIAL OFFERS

    Marketing models that employ “Free-Trial”, “Deferred Billing” and/or “Shipping Only” are considered trial offers for purposes of this communication. Consumers must be receiving a tangible good or contracted service in exchange for charging of payment cards. Incentivized discount offers are acceptable when the cardholder is receiving goods
    or services in exchange for payment; however we will be unable to support accounts engaging in hidden or delayed charges and ‘free’ offers that are not truly free.

    1. Avoid using terms in your marketing and offer presentation such as “Free”, “Risk Free” or any similar and potentially misleading phrases when consumers will be enrolled in a monthly continuity program at the end of a trial period, or will be paying a deferred charge for the trial period. The phrase “Free Trial” is prohibited unless there is truly no cost or obligation incurred by the consumer.

    2. ”Shipping & Handling Only” offers must be a fair and accurate shipping charge reasonable to be accrued by the merchant for providing the product.

    3. Trial offers must be extended for a minimum of 10 days.

    4. Trial periods should not begin until the product is shipped to the consumer.

    MARKETING

    1. Avoid creating a ‘false sense of urgency’ for the consumer. Unless the consumer’s ability to order is genuinely taken away after a specified timeframe or order count is reached, this practice is prohibited. Use of applications such as countdown clocks, tickers, or language such as “Offer Expires Today!” is also prohibited.

    2. Product claims, by law, must be truthful. Claims regarding effectiveness must be substantiated by clinical research conducted to support the claims, and consistent with the formulas and ingredients in your product

    3. Qualifications for trial periods of a product should follow pre-determined rules disqualifying consumers who do not meet parameters, including but not limited to: Age, Weight, Height, and Location.

    4. Unreasonable claims or guarantees are prohibited. Examples of claims considered unreasonable are: “Flushes Pounds”, ”Flushes Toxins”, ”Builds Muscles”
    - Stating that use of a product will result in permanent weight loss
    - Stating that a product will cause the consumer to lose a specified amount of weight in a specified timeframe
    - Stating that a product will cause substantial weight loss no matter what or how much the consumer eats.
    - Stating that use of a product can cause weight loss (or muscle growth) in specific body parts

    “Free Money”, ”Instant Money”

    - Stating that the product can substitute the income of a full time job
    - Stating that money can be earned with little to no effort or investment
    - Stating that use of a product will earn you hundreds of thousands or millions of dollars
    Additional examples include:

    - Stating that the product has been successfully used by an unrealistic or unsubstantiated number of people
    - Stating that a product will secure the consumer a job, either at the product’s company or another company
    - Stating or implying that a product is endorsed or in any way associated with President Obama or a government entity.

    ENDORSEMENTS/TESTIMONIALS:

    1. Endorsements and testimonials of user experiences must reflect the true and honest opinions of the endorsee(s).

    2. Endorsements and testimonials provided must present a clear picture to consumers of realistic results of using the product. If advertisers do not have substantiation of a specific claim or endorsement, then generally expected results must be clearly disclosed and backed by substantiation of any claims.

    3. Blogs used for promotional purposes must be in compliance with published FTC guidelines, representing an accurate and full representation of the endorsee, or clearly designated as a fictional story if developed internally for marketing purposes.

    4. News Sites published in marketing materials must be in compliance with published FTC guidelines, and must be clearly presented to the consumer as an advertorial. Written consent should be obtained from a media outlet prior to using the logo.

    5. Implied celebrity endorsement by use of an image in your marketing is prohibited without express legal written consent.

    AFFILIATE MARKETING (CPA) NETWORKS

    A significant contributing factor to Historical Excessive chargeback violations has been the utilization of CPA Networks. Transactions generated from internet traffic and all other lead sources must be managed and monitored for potential fraud using an approved system. Third Party service engagement may be a requirement for account approval.

    1. CPA Networks should contractually be held accountable for monitoring traffic generated from participating marketers.

    2. Merchants must have monitoring plans in place to detect suspect traffic and monitor Affiliate and Sub-Affiliate performance.

    BILLING TERMS DISCLOSURE

    The FTC has recently published guidelines regarding “Negative Option” enrollment programs and is taking a very aggressive position against merchants utilizing/employing this business practice. Recommendations taken in part from the FTC’s website may include but are not limited to the following:

    1. Negative Option disclosures must be clear and conspicuous to the consumer and comply with published FTC
    principals.

    2. The full price of products sold must be within reasonable “fair market value”
    3. Under no circumstances should consumers be billed for a product or service not disclosed.

    4. Consumers must be required to validate understanding of the terms of the offer twice during order submission.
    The first validation can take place with the initial offer presentation prior to submission of credit card information, and the second during the checkout process. The confirmation order page must also require consumers to acknowledge that they agree to the Terms & Conditions and authorize the merchant to charge the credit card
    for the disclosed dollar amount. Terms must be displayed adjacent to the “submit”,”confirm” or any other “call to action” button confirming the order. The price must be within 100 pixels of the “submit”,”confirm” or any other “call to action” button.

    - Terms must be in a minimum 12-point “easy to read” font.
    - Avoid visually distracting graphics from the display of terms.
    - Pre-checked boxes must never be used.
    - Consumers should be required to actively and individually select each offer or bonus during the checkout process when there are multiple offers or up sells presented. No offers or up sells should be pre-selected or pre-checked.
    - Consumers should not be able to move forward in the offer or checkout until the box acknowledging the terms is checked.
    - Verbiage must clearly disclose the enrollment into an ongoing membership with no distraction. An example of an acceptable disclosure is: “By clicking “Submit” you acknowledge that you understand you are being enrolled in a 10 day trial for $4.95, and after expiration of the 10 day trial period you will be charged $59 per month until you cancel your service”
    - All products or services purchased when the call-to-action button is clicked should be billed as a single charge unless the order is fulfilled at different times requiring multiple charges.
    - Shipping and Handling should not be billed separate from charges for the product or service.

    BILLING TIMEFRAMES

    1. A merchant may not bill a consumer the full price twice in a 30-day span. An acceptable billing cycle example would be:

    - Day 1 – Consumer signs up for a 10 day trial offer with paid shipping of $4.95 charged at the time of order.
    - Day 11 – The first monthly order is shipped and the consumer is billed the full price of $59.
    - Day 41 – The second monthly order is shipped and the consumer is billed the full price of $59.

    2. Consumers should not be billed prior to shipment of products.

    REFUND POLICIES

    Merchants must not make it difficult for consumers to exercise the disclosed cancellation procedures and all cancellation requests must be honored in accordance with the stated terms of the transaction.

    1. Refund policies must be disclosed prior to the sale completion. Establish a clear, concise statement of your refund and credit policy. Your policy should be consistent with the objectives of your business and the products or services sold.

    2. Merchants must not require return of any trial offer product samples in order for the consumer to receive a refund, or cancel their ongoing subscription.
    3. ”Full Money Back” or “Full Satisfaction” guarantees are considered false and prohibited unless the offer provides a full refund on all products, including but not limited to Shipping & Handling charges.

    4. Refunds should be for the full amount charged including shipping and handling

    5. All future billing to a customer should be canceled when a refund is issued.

    6. All future billing to a customer should be canceled when a chargeback is received.

    BACK END OFFERS, AKA UP SELLS OR CROSS SELLS:

    All sales should be directly between the business entities (merchants) processing the transactions and the consumer, with consumer authorization for all purchases.

    1. Under no circumstances can consumer data be shared with another company as this is a violation of Brand
    Regulations, including but not limited to the Payment Card Industry Data Security Standard.

    2. Forced and hidden up sells are strictly prohibited

    3. Up Sells with recurring charges are prohibited, regardless of consumer opt-in or acknowledgement of the offer.

    4. A one-time bonus offer may be extended to the consumer for an additional product offered by the same company as the initial transaction. The price of the bonus offer must be clearly disclosed and the consumer must acknowledge the terms of the sale prior to providing credit card information for completion of the sale, and again at order confirmation/ submission.

    DESCRIPTORS

    1. ALL MERCHANTS DEFINED AS OFFERING A DIRECT MARKETING PRODUCT WILL BE ASSIGNED A DESCRIPTOR FORMATTED TO COMPLY WITH VISA REQUIREMENTS, TO INCLUDE AN *.

    2. Billing descriptor should be consistent with the website name, marketing materials, purchase confirmation, and shipping notification (if any) sent to the consumer.

    FULFILLMENT

    1. Orders must be fulfilled in a timely manner. It is recommended that all products be shipped within 48 hours (2 business days) from the date of order.

    2. A confirmation email should be provided for all online orders with physical shipment, within the prior 5 days to shipment or 2 days following shipment, including the following information:

    - Merchant contact information (at minimum a consumer service phone number)
    - Order information including purchaser’s name, unique order or customer ID, summary of item(s) purchased
    - Terms of the order, including initial amount billed and future billing schedule (this should be stressed)
    - Cancellation and refund policy
    - Delivery confirmation / tracking information
    3. An invoice should be included with the product including the following information:

    - Merchant contact information (at minimum a consumer service phone number)
    - Terms of the order, including initial amount billed and future billing schedule
    - Cancellation and refund policy

    CUSTOMER SERVICE:

    1. Multiple methods of cancellation must be provided for consumers to cancel or request refunds, including at least two options of contact. Example of acceptable service channels include: phone, email, mail, and online chat. Phone support is strongly recommended as one of the options.

    2. ”Contact Us” information including contact methods and hours of availability should be prominently displayed in all marketing, offer and payment pages, as well as included in purchase confirmations, invoices and any other communication with consumers.

    3. Customer Service must be easily accessible and available during reasonable business hours

    4. Refund and Cancellation Policies must be followed as disclosed to the consumer at the time of order

    5. Hold times to reach Customer Service must be less than 2 minutes.

    6. After hours voice mail should include a greeting that properly identifies the merchant to the consumer, provides hours of Customer Service availability and an expectation for call back.


    These for the most part seem to me to be reasonable guidelines that will ultimately help protect product makers and their affiliates from violating FTC guidelines.

  12. #12
    Affiliate Manager ParadigmWilliam's Avatar
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    I think this will give affiliate marketing a better name. These types of offers reflect badly on affiliate marketing.

    Overall, a good thing.
    [URL="http://www.manageaffiliatelinks.com/"][COLOR="Red"][B]Manage Affiliate Links[/B][/COLOR][/URL] - Redirect Dead, Expired, or Broken Links

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  13. #13
    ABW Ambassador Boom or Bust's Avatar
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    I'm with the crowd that thinks this is a good thing. It's a shame, like Kellie said, that govt regulation had to step in to clean it up. It's also a shame that affiliate networks perpetuate and propagate programs that utilize shady tactics to cash in on unsuspecting consumers.

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