ISO’s Should Prepare To Respond To Government Agencies At The Drop Of A Hat
- March 20, 2018
ISOs are under increasing scrutiny from government watchdogs. Federal bureaus and a plethora of state agencies are ramping up enforcement efforts, even in business-to-business trade. Examples of this lie in Kansas and South Dakota – among others – which apply consumer protection laws to businesses. (See2010 WL 4429527, Door-to-Door Sales at Places of Business Subject to KCPA; S.D. Codified Laws § 37-24-5.3). Thus, ISOs should enact preventative measures and prepare for government imposition.
ISOs can enact preventative measures by tuning into recent legal developments. For example, an ISO should know that South Dakota requires a seller of services and equipment to furnish the buyer with a copy of the contract at the time of execution. (S.D. Codified Laws § 37-24-5.3). The seller must also state, and the contract must provide, a notice that the buyer may cancel within three (3) days of the sale. Should the seller fail to do so, the contract is void. As such, any later enforcement efforts could be thwarted and the ISO would lose out on revenue.
ISOs can also prepare for government imposition by complying with the law, reducing risks, and reducing costs. Government agencies have the ability to subpoena ISOs and their employees. ISOs must act quickly in responding to subpoenas. Responding quickly gives government agencies the impression that you are on top of your game. (See 6 Steps for Responding to a Civil Investigative Demand, Law360.com [“you never get a second chance to make a first impression.”]). Oftentimes, such a response will satisfy their inquiry. While complying with the law is ideal, however, ISOs should have a backup plan should things go awry.
ISOs should always have an attorney on retainer. A knowledgeable regulatory attorney experienced with government agencies can help decipher and respond to agency requests, including subpoenas. Attorneys can help combat subpoenas. First, they have the ability to determine precisely what information the subpoena seeks. Doing so allows ISOs to evaluate whether they are the regulator’s target or merely a step towards the regulator’s target. It also enables the ISO to see whether the subpoena implicates any violations of state or federal consumer finance law, giving the ISO notice of potential penalties and enabling it to plan accordingly. Second, attorneys can challenge the subpoena as overbroad and burdensome, thereby narrowing its scope and protecting potentially damaging information. Third, attorneys can determine privileged documents and refuse to respond to inquiries of such information. Lastly, and perhaps most importantly, it allows ISOs to respond to these subpoenas quickly and effectively, thereby creating the impression that it has nothing to hide. Therefore, ISOs should attempt to comply with the law, and in doing so retain an attorney in an effort to take it out of agency crosshairs.
Article by: Greyson M. Goody, Esq.
Rohit Chopra, who took office as director of the Consumer Financial Protection Bureau...Read More
If you are new to high-risk merchant accounts, you will want to read...Read More