Questionable Merchant

A Questionable Merchant is a merchant or merchant location at which an excessive number of confirmed fraud transactions have occurred within a specified period.

Questionable merchants are often reported by referral groups and third party sellers who regularly interact with their public, such as online sales and service providers. These parties usually describe the pattern that has defined the questionable merchant as such. Often these can be simple explanations as to why shipping has been delayed and for customers to continue business through them to their questionable merchant to more substantial claims of fraudulent action. Sometimes these parties meet with the leadership of such questionable merchants to define the solution to any visible problems that occur which affect an overall sales process. Since most online third parties are interactive entities that allow for great ad varied user and customer input, these groups will often request specific incident reports or informal letters to help define the case against the questionable merchant.

When questionable merchant activity arises and a merchant has been identified by a major credit card company for excessive fraudulent activity, all fraud transactions can be charged back to the merchant, during the identification period. This, of course, saves

Merchant chargeback monitoring programs set up by major credit card companies identify merchants who demonstrate excessive chargeback activity. Any merchant with a ratio of chargebacks to credit card sales volumes of approximately two or more percent in a one-month period may be considered excessive. In many cases, a major credit card company may reserve the right to terminate their entire merchant agreement, if not contact authorities formally for legal prosecution in the case of high volumes. If a merchant consistently has a similar percentage of chargebacks over a period of time (for instance several months), then simple fines could be assessed and required of the questionable merchant and they could be placed into a provisional probation period.

Questionable Merchant Activity programs exist for major credit card companies, such as Visa. In Visa’s risk management program, all merchants participating in the acceptance of Visa cards are regularly monitored for confirmed fraud sales transactions and tracks fraud transactions by specific merchant location. Any merchant location meeting or exceeding the program criteria three consecutive months will be identified as a QMA location and will be subject to chargeback liability for a minimum of a three month period.

MasterCard also has provided solutions and programs to deter fraudulent activity that may lead to the status of Questionable Merchant, such as:

  • RiskFinder, which is MasterCard’s proprietary neural network, and is an advanced system for providing accurate predictions enabling fraud detection in near real-time.
  • SAFE (system to avoid fraud effectively) is the central repository for fraud data within MasterCard, and supports fraud prevention programs and security efforts. SAFE generates regular global reports from the information that all MasterCard issuers are obliged to provide at least monthly on fraudulent transactions.
  • Fraud Velocity Monitoring is a formidable first line of defense against fraudulent activity, and provides an early warning of suspicious cardholder activity and questionable merchant action.