The Complete Guide to Credit Card Processing Laws for Merchants - BNG Payments (2024)

Credit card processing laws are notoriously difficult to keep up with. Every year, new legislation is passed that impacts how you process credit cards and the fees involved in doing so. The last thing any business owner needs is to be out of compliance with these complex rules, so it's essential to stay on top of them at all times.

PCI Compliance

The Basics of PCI

The acronym PCI stands for Payment Card Industry. The PCI is in charge of enforcing a strict set of rules known as the PCI DSS (Payments Card Industry Data Security Standards). It's a set of industry-wide guidelines aimed at preventing fraud.

The Data Security Council, which is made up of significant credit card companies such as Mastercard, Visa, American Express, and Discover, created the PCI DSS.

All merchants, financial institutions, payment processors, and merchant services providers are responsible for adhering to the PCI DSS credit card processing laws, which help protect the cardholder's data during a transaction.

PCI compliance will protect your business from data breaches and help you avoid the crippling costs of fraudulent transactions. Furthermore, failure to comply with PCI standards is punishable by large fines, so it's best to learn about them as soon as possible.

Why Is It Important to Know These Laws?

On a fundamental level, understanding these credit card processing laws will help ensure that your business is protected from criminal activity. The fines can be prohibitively high for those who aren't compliant with PCI DSS regulations, so it's vital to make sure you're following the rules as closely as possible.

We see an increasing number of lawsuits being filed against businesses by credit card companies and consumers regarding these laws. We have seen a lot of good information coming out about this topic over the past few years.

However, it is still very confusing for many merchants. Not knowing what you can or cannot do could end up costing your business thousands in fines if you happen to violate these laws.

How Can You Ensure That Your Business Is PCI Compliant?

The first thing you need to do is educate yourself on these laws. Many resources are available, but one of the best places to start your research will be your credit card processing company or merchant services provider because they should have plenty of information about compliance regulations that apply directly to them and their business model.

If you use a third-party payment processor, ensure that your chosen company has worked hard to become PCI compliant. If they haven't done so yet, you may want to look for another provider.

The best way to ensure compliance with credit card processing laws is by following them carefully and staying on top of any changes made each year. It's a time-consuming process, but it's a crucial one.

The Four Levels of PCI Compliance

Level 1 PCI

  • Businesses that process more than six million payments per year are eligible for this program.
  • The most expensive option.
  • It includes the costs of hardware and software and the costs of training an internal auditor.

Validation requirements

  • A Qualified Security Assessor (QSA) or an internal auditor must submit an annual Report on Compliance (ROC) every year.
  • An ASV performs a quarterly network scan.
  • Form for Attestation of Compliance

Level 2 of PCI

  • This program is for companies that process one million to six million payments per year.

Validation requirements

  • Quarterly network scan by ASV
  • Attestation of Compliance Form
  • Annual Self-Assessment Questionnaire (SAQ)

Level 3 PCI

  • For companies that process 20,000 to one million eCommerce payments per year.

Validation requirements

  • Annual SAQ
  • Quarterly network scan by ASV
  • Attestation of Compliance Form

Level 4 PCI

  • Businesses that process up to 20,000 eCommerce payments or one million payments through other channels per year are eligible.

Validation requirements

  • Annual SAQ recommended
  • Quarterly network scan by ASV, if applicable
  • Compliance validation requirements set by the merchant bank

How Do Credit Card Processing Companies Maintain PCI Compliance?

Companies that process credit card payments must adhere to the standards set by PCI DSS. The Payment Card Industry Data Security Standard is a series of requirements for security protection.

It applies to all companies involved in storing, processing, or transmitting customer credit card data. These laws are necessary because they help protect businesses from breaches due to cyberattacks on their systems.

This standard was created specifically for merchants who store sensitive financial information about customers' payment accounts.

The violation fines can be crippling if your business does not meet these compliance rules as outlined, so staying up-to-date with changes each year will ensure you're never caught off guard by something unexpected happening during an audit.

Conclusion

PCI compliance laws are created to protect both merchants and consumers. Merchants must comply with these rules, or they can face hefty fines for noncompliance, so staying up-to-date on changes each year is critical.

Credit card processing companies have an even greater responsibility for PCI compliance because their business model requires that they store payment account data securely at all times.

They are also held accountable by auditors if there is a breach of security that leads to the loss of customer financial information, so you should only work with providers who maintain high levels of service quality standards within their company culture.

ContactBNG Payments to learn more.

The Complete Guide to Credit Card Processing Laws for Merchants - BNG Payments (2024)

FAQs

What regulations apply to payment processors? ›

Additionally, payment regulation mandates stringent security measures, data protection standards, and adherence to anti-money laundering (AML) regulations to thwart fraud, cybersecurity breaches, and illicit financial activities.

Which of the following law or standards deals with processing credit cards? ›

Credit card payments must be processed in compliance with Payment Card Industry Data Security Standard (PCI DSS) requirements, which are intended to limit exposure and/or theft of personal cardholder information.

What are the four steps of credit card processing? ›

What are the four steps in order for a credit card transaction? The four steps involved in a credit card transaction are authorization, authentication, batching, clearing and settlement, and funding.

Which is the standard regulating credit card transactions and processing? ›

PCI DSS (Payment Card Industry Data Security Standard) 4.0 is a set of rules and guidelines designed to help organizations that handle credit card information keep that information safe and secure. These guidelines are essential to protect against data breaches and credit card fraud.

Do payment processors have to be PCI compliant? ›

Every business, regardless of the number of card transactions processed, must be PCI compliant. The card networks (Visa, Mastercard, American Express, etc.)

What is the difference between a payment processor and a merchant account? ›

A payment processor handles the transfer of funds between the customer's and the business's financial institutions, ensuring secure and efficient transaction processing. Merchant account: A merchant account is a special type of bank account that allows businesses to accept and process electronic payments.

Who enforces PCI compliance for merchants? ›

The Council is responsible for managing the security standards, while compliance with the PCI set of standards is enforced by the founding members of the Council, American Express, Discover Financial Services, JCB International, MasterCard Worldwide and Visa Inc.

How long does a merchant have to process a credit card transaction? ›

Generally speaking, credit card issuers don't have a time limit for charging a customer's credit card. The issuing banks, however, will often impose a limit on merchants for charging. These limits can range anywhere from three to 30 days.

What is the new legislation for credit cards? ›

The Credit Card Competition Act is a bipartisan bill that, according to its backers, is intended to break up what they view as a Visa-Mastercard duopoly. It would require large banks to allow more choice in terms of what payment network can be used for processing transactions that involve their credit cards.

What standards control the processing of credit cards? ›

The Payment Card Industry Data Security Standard (PCI DSS) is a widely accepted set of policies and procedures intended to optimize the security of credit, debit and cash card transactions and protect cardholders against misuse of their personal information.

What is the four party payment model? ›

A four-party system describes a payment system (usually a card payment system) with the following four parties: the payer (often referred to as the cardholder), the payee (often referred to as the merchant), the payer's payment service provider (often referred to as the issuer) and.

What does a merchant see when you make a purchase? ›

At the time of purchase, when a customer swipes their card, the merchant is supposed to compare the signature on the card with the signature on the receipt. In the event that there is a discrepancy, or if the back of the card is unsigned, then merchants are instructed to ask for a photo ID to compare with.

What must you never do when processing cardholder data? ›

Never store the card-validation code or value (three- or four-digit number printed on the front or back of a payment card used to validate card-not-present transactions). Never store the personal identification number (PIN) or PIN Block. Be sure to mask PAN whenever it is displayed.

What is the rule for credit card payments? ›

Standard payment dates and times.

Your credit card company must mail or deliver your credit card bill at least 21 days before your payment is due. In addition Your due date should be the same date each month (for example, your payment is always due on the 15th or always due on the last day of the month).

What is the approval code for credit card processing? ›

What is an authorization code? A credit card authorization or approval code is an alphanumeric string generated at the POS. Normally consisting of five to six characters, this one-time approval code is unique to each transaction.

What are payment services regulations? ›

3.1 The Payment Services Regulations 2017 is assimilated law which broadly governs the authorisation and associated requirements for authorised or registered payment service providers (PSPs). This includes the rights and obligations in relation to the provision of payment services.

Do payment processors need to be HIPAA compliant? ›

However, keep in mind that payment processing platforms are not considered business associates under HIPAA. This means they're not required to be HIPAA-compliant.

What is Regulation 99 1 of the Payment Services regulations? ›

(1) If a payment service provider becomes aware of a major operational or security incident, the payment service provider must, without undue delay, notify the FCA.

What federal regulations apply directly to electronic banking? ›

Subpart A of Regulation E applies to any electronic fund transfer (EFT) that authorizes a financial institution to debit or credit a consumer's account.

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