Merchant Agreement

Also called merchant processing agreement, MPA, card acceptance agreement

The contract between you and the acquiring bank that governs your account, and the document almost nobody reads before signing.

What it is

The merchant agreement is between the merchant and the acquirer, usually an acquiring bank together with a processor. The salesperson who sold you is generally not a party to it. That single fact explains a great deal about the service you receive afterward. What you actually sign is usually a short application with rates on it, incorporating by reference a much longer program guide or terms of service delivered separately, sometimes by email after signature. The incorporated document contains the parts that matter: the full fee schedule, the right to amend fees on notice, reserve rights, termination rights, early termination fees, liability allocation, chargeback responsibility, and the personal guaranty if there is one. Several structural points follow from network rules. Only the acquirer has authority to terminate a merchant agreement. ISOs cannot retain settlement funds. Responsibility for compliance sits with the sponsoring acquirer and is not delegable to the ISO. So whatever brand is on the folder, the counterparty relationship is with the acquirer. The terms most likely to cost you money later are the amendment provision, which usually permits fee changes on notice, the early termination fee, the equipment terms if any equipment is leased rather than purchased, and the automatic renewal clause.

Why it matters to your business

Ask for the complete document set before you sign, not after: the application, the program guide or terms incorporated by reference, and the full fee schedule with every fee named and quantified. If a provider will not send all three in advance, that is the most useful piece of information you will get from the entire sales process. Then read four things: the amendment clause, the term and automatic renewal, the early termination fee, and the equipment terms. Those four determine what leaving costs you, which is the only leverage you retain after signing. This is education, not legal advice. A merchant agreement is a binding contract with a bank; if you are signing something material, have your attorney read it.

Where it gets contested

The industry practice of incorporating the substantive terms by reference, and delivering them after signature, has been criticized for years and is still standard. It is legally effective in most cases and commercially indefensible in a business that markets itself on transparency. There is also a persistent gap between what is negotiated and what is documented. Verbal promises about rates, fee waivers, no reserve, no early termination fee, are made constantly and survive only if they appear in the signed document. A salesperson's text message is not an amendment to a bank contract. What remains unresolved industry-wide is whether the disclosure standard being applied to merchants toward consumers, all-in pricing, clear disclosure before commitment, will eventually be applied to processors toward merchants. Nothing federally regulates processor-to-merchant fee disclosure today, and the political climate has moved without producing a rule.

How to check it yourself

Email your prospective provider and ask for the complete terms incorporated by reference plus a fee schedule listing every fee with amounts, before signature. Save that email. The response, or the absence of one, is your answer.

Receipts

Claims above that are checkable, with where to check them. Published so you do not have to take anyone's word for it.

Only the acquirer has authority to terminate a merchant agreement, ISOs cannot retain settlement funds, and acquirer compliance responsibility is not delegable
mastercard.us ↗
Visa requires members to oversee third party agents including compliance with consumer protection law
usa.visa.com ↗
ISO and agent agreements, portfolio sales agreements and reserve account release are recognized payments law practice areas
globallegallawfirm.com ↗