Can't use credit cards to buy loose tobacco online?

[galeon]

Thank you for keeping us informed, Jessica. In my opinion, it reflects greatly upon your business and you've earned yourself a new customer.
I wish the best of luck to you and any other B&M's going through these problems right now.
Steve

 

[karlj]

Thank you Jessica for the detailed clarification. I started this thread with a question that brought on a lot of assumptions, and we all should know what happens when you assume (you make an ass out of U and me). Thank you for coming on her, taking your time, and explaining the situation. I'm sorry if you became the target for mud slinging. That wasn't my intentions in starting this thread.
My name is Karl, I'm the one who spoke to Amanda BTW. She was very polite and answered my questions to the best of her knowledge. Please thank her for me

 

[smoker49]

Yes, but... This is a policy that is apparently very new. We were not aware of it until they called and they told us that we were found by a "secret shopper." If I was a store that had not been "caught" yet, I would continue business as usual.

Unfortunately, Mastercard has decided not to be a smoker friendly company, but this is most definitely not new. In fact, the policy has been in place since the year 2000, and cigar companies have had their online processing accounts temporarily shut down since at least far back as 2002. I have heard of the "secret shopper" credit card problem before. It's usually an employee of the company going through and auditing accounts. In the case I have personal experience with, it was because the merchant didn't have a high risk account, and got caught selling high risk merchandise. The workaround is to get a high risk account in the first place, and pay the money they want you to pay as a cost of doing business.

Apparently, because this form of tobacco appeals to underage smokers, it is more prone to chargebacks. This puts us in a high risk category with special rules. Some of these rules trickle in to us as we keep contact with the credit card company and while Mastercard told us that this was all credit cards, they are most definately the strong arm in this based on our experience.

Yes, all the credit card companies require high risk merchandise to be sold with a high risk account. Again, nothing new here.

Once we are set up, we will most likely drop Mastercard. Not only did they lead this charge, but they are also requiring a 500 dollar yearly payment for our storefront now and a legal opinion that we are not breaking any rules. In order to use Paypal services, Mastercard also requires and additional 2,000 on top of the otehr charges yearly.

So you didn't have a high risk account, and you got caught by Mastercard and/or the gateway company.
Your initial email stated that all the card companies were denying all sales of loose tobacco online. That is a radically different problem from Mastercard charging more to tobacco retailers, and realizing you didn't have a high risk account thereby shutting down your online presence. Although I feel very bad for the amount of headaches you have to go through as a retailer of tobacco, they are just that... headaches of the retailer. When you start claiming it's the end of tobacco retailing online because you had your account suspended, well, you'll forgive me if I don't feel grateful that you played that out in front of the consumer. Pay the extra fees, upgrade your website and recoup those costs back. I guess it makes me a jerk to be so blunt about all of this, so be it, but I don't understand why you handled this the way you did. Other retailers have had this same problem with Mastercard/high risk accounts, but they paid the fees and moved on with business. I hope you figure out a way to do the same.

 

[foggymountain]

Hotlips: I find it interesting that Mastercard charges you an annual $500. fee. I had an internet camera store. I closed the credit card accounts and switched to Paypal for the same reason. An annual charge, a monthly charge, an item charge, + an ever increasing percentage.It looked like the banks were trying to make up their bad loans on the backs of small retailers.

 

[checotah]

Jessica, thank you for helping us understand what's happening.
One thing upon which I am unclear: is this credit card company policy/practice, or is it law? If law, any idea which law(s)?

 

[spartan]

I'm torn, Smoker49 makes so much damn sense.... and hotlips seems to be honestly trying to convey what's going on....
I hope that it's a simple matter of "you didn't have the correct account to be selling what you're selling, give us more money and all will be fine."
Happy Smoking to all. Stay calm. Smoke a bowl.
If the sky is falling... We'll sell umbrellas in exchange for tobacco. ::

 

[smoker49]

Let me apologize for a second. Jessica, I am sorry for being a jerk about your current problems. No matter how I write what I want to say, it comes across as "I know more than you," and that is not my intention. My wife says I have a huge amount of Irish charm in me, and an equally huge amount of Irish a$$%&@*. Ha ha.
As I understand it, this is an initiative started by Mastercard, and deals with online adult entertainment, prescription drugs, gambling and tobacco merchants. They claim that these industries are "high risk" categories. For that, they make the gateway companies do extra paperwork and pay fees and fines for noncompliance. Some gateway companies panic and refuse to deal with merchants in high risk categories at all. In the middle are the gateway companies that charge extra for the hassle. So the problem comes from both Mastercard, and the gateway companies trying to deal with Mastercard's nonsense.
Here is a link to Mastercard's merchant policy handbook. These are policies that Mastercard requires the gateway companies and merchants to follow if they want to be involved in business with Mastercard. Pay special attention to chapter 9. That is the section regarding tobacco merchants.
http://www.mastercard.com/us/merchant/pdf/SPME-Entire_Manual_public.pdf

 

[badbriar]

when did this start??? I ordered several tins and bulk, along with an estate pipe about two weeks ago and no issues. What gives???

bb

 

[sparroa]

I guess it remains to be seen if there is actually collusion between the credit card companies to ban the use of credit/debit cards for online tobacco sales a la Great Britain.
So far it is still very ambiguous and it is not clear at all what the rules are, who they apply to, who is enforcing it, who is honouring it, and what it all means for the consumer...
Either way, I HOPE that smoker49 is right that its just a continuation of Mastercard BS but I do not necessarily doubt the veracity of JustforHim's claims.
It's probably too soon to tell what's going on for sure...

 

[organizedmadman]

After receiving the same email, I wrote back and asked them to elaborate. Their response clears things up a bit I think:

"We are working on this issue and are trying to find a solution. We are not the first tobacco business affected by this and it is the policy of Mastercard.

Thanks,

-Christian from Just For Him"

So yup, looks like it's just MasterCard up to their old tricks again.

 

[mrenglish]

My local B&M, Pipes and Pleasures, was just notified as well. They do not do a lot of tobacco business online but I guess enough they were notified.

 

[hotlips]

Good Morning -

Let me preface this batch of answers by putting a few things out there -
-We have shared info as we receive it, which means I may have more this afternoon than I do now and I may have more now than I did yesterday.
-Different people have different understandings and answers as apparently policy and practice are not always as close as we may expect
-This isn't something we just rolled over on. It also isn't something I believe we have attempted to overestimate or cause a panic with. One of the best things about the fine tobacco business is how much many of the people involved genuinely like each other and work well together. We called other companies when this happened to share our story, prepare them and use any info they already had. At least one larger site also saw our email and called us to offer help.
-I sometimes choose my words poorly. I was an English major, I should know better.

 

[hotlips]

My name is Karl, I'm the one who spoke to Amanda BTW. She was very polite and answered my questions to the best of her knowledge. Please thank her for me

Thank you, I love hearing good things about our team. Amanda was our first hire after we made it through our local smoking ban issue. She handles our non tobacco items -but she has already added a new pipe to her collection (which now numbers 2) and is learning her way around pipes and cigars
I will pass on your compliments

 

[hotlips]

Unfortunately, Mastercard has decided not to be a smoker friendly company, but this is most definitely not new. In fact, the policy has been in place since the year 2000, and cigar companies have had their online processing accounts temporarily shut down since at least far back as 2002. I have heard of the "secret shopper" credit card problem before. It's usually an employee of the company going through and auditing accounts. In the case I have personal experience with, it was because the merchant didn't have a high risk account, and got caught selling high risk merchandise. The workaround is to get a high risk account in the first place, and pay the money they want you to pay as a cost of doing business.

I wish I had used a better phrase than "high risk" but that is what they used and that's what I'm going to have to continue with. The problem with this explanation and my wording choice is that it implies

1- that we did not have the correct account for our needs

2- that we could pay more to get the correct account
We are authorized to sell tobacco. We pay every fee and sign every paper. Our charge backs historically are close to nil and our records are clean.
Nothing that I have found in the posted policies states that you cannot sell pipe tobacco - simply that it is a high risk item which has to follow rules. The rules given to us recently are what have ( as far as we have been told) recently changed. The rules have relabeled non face to face tobacco as a non-sale (is that more clear). So, we are a high risk account because we sell tobacco. We are a no sale account because we sell it online. These are the rules that I refer to. The rules are not ones that allow us to sell tobacco online, they are rules that allow us to continue to accept MasterCard in our store. Following the rules and paying them another two thousand dollars would apparently allow us to sell online through PayPal - I'll hit that in a separate post.

 

[dochudson]

no MC or Visa here.. I have a Amex for travel and PayPal for toys. if someone doesn't take either then I move on. Locally I only use cash as far as I know most places still take cash.

 

[hotlips]

PayPal note -

This is outside because it is the question I would ask and I don't have an answer for yet. I don't know the back end reason that PayPal can or will accept credit cards that I am being told are unacceptable elsewhere. Of course it is possible that every other gateway and bank and rep we have talked to would rather tell us that it is impossible than deal with this issue. I can't tell you what in their system makes them able to handle this, only that I am glad they have a way and that we are working things out as quickly as possible and hoping that it continues to be an effective solution.

 

[hotlips]

Yes, all the credit card companies require high risk merchandise to be sold with a high risk account. Again, nothing new here.
So you didn't have a high risk account, and you got caught by Mastercard and/or the gateway company.
Your initial email stated that all the card companies were denying all sales of loose tobacco online. That is a radically different problem from Mastercard charging more to tobacco retailers, and realizing you didn't have a high risk account thereby shutting down your online presence. Although I feel very bad for the amount of headaches you have to go through as a retailer of tobacco, they are just that... headaches of the retailer. When you start claiming it's the end of tobacco retailing online because you had your account suspended, well, you'll forgive me if I don't feel grateful that you played that out in front of the consumer. Pay the extra fees, upgrade your website and recoup those costs back. I guess it makes me a jerk to be so blunt about all of this, so be it, but I don't understand why you handled this the way you did. Other retailers have had this same problem with Mastercard/high risk accounts, but they paid the fees and moved on with business. I hope you figure out a way to do the same.

I don't know how to be more clear on this. But I will try. This was not a case of not having the correct risk filed and paid for. It has been mentioned on this forum that we tend to error on this side of caution in laws, rules regulations... I believe in information and I have put this out there so that other retailers know what is going on and so that our customers are not blindsided as we work through this.
As we understand it (and yes, we have talked to processors, lawyers, tobacco companies, banks...), the process goes like this right now -

-Mastercard leads the charge, checking websites etc.

-All of the credit card companies have decided that risk factor, at least in this arena, of one will be shared by the others.

-Mastercard considers pipe tobacco a nonsale item online and high risk face to face.

-Mastercard flags an account as a high risk level that includes a no online tobacco clause. In our case this means Mastercard has said if we want to separate out pipes and cigars from actual pipe tobacco, we can continue to use them online under our existing high risk account.

-Once flagged, the account by all card companies as having a nonsale item online even though it was MasterCard that led the charge.

-For the account, getting a company to process is not the issue as much as getting the ability to sell that certain item without receiving fines from Mastercard. For example, I can sell tobacco in our store because I have proven that we follow all the laws of the state and policies of Mastercard as verified and signed to by legal counsel. I also paid the fees. Online (with the exception I have already mentioned of PayPal which I have no better explanation for), there is no such set of conditions that I can follow to make this ok with any processing company.
In hindsight, we would have been better off discontinuing Mastercard who is the one that cares. The credit card companies, we have been told, are sticking together and honoring each others flags. By taking MC out early, the others would most likely not have cared.
I would love to be proven wrong. I hope to be proven wrong. We could be talking to someone tomorrow who comes up with a great policy issue that means we missed a loophole everyone is willing to work with. I hope it happens.
When I use only MC by name it's because even though the others have flagged us, I don't feel right calling them out as causing this.

 

[hotlips]

Here is a link to Mastercard's merchant policy handbook. These are policies that Mastercard requires the gateway companies and merchants to follow if they want to be involved in business with Mastercard. Pay special attention to chapter 9. That is the section regarding tobacco merchants.

We follow all of the retail rules. The online rule that we unknowingly violated was no sales of pipe tobacco no face to face. There are non face to face ways they will allow other OTP that are shippable (cigars).
The handbook is not a fun read, but it is required around here. It appears to me that policy and practice don't line up exactly which is one reason we are always hopeful.

 

[hotlips]

As I understand it, this is an initiative started by Mastercard, and deals with online adult entertainment, prescription drugs, gambling and tobacco merchants. They claim that these industries are "high risk" categories. For that, they make the gateway companies do extra paperwork and pay fees and fines for noncompliance. Some gateway companies panic and refuse to deal with merchants in high risk categories at all. In the middle are the gateway companies that charge extra for the hassle. So the problem comes from both Mastercard, and the gateway companies trying to deal with Mastercard's nonsense.

For a large part, this is correct. I think the biggest hole is that they have declared a product nonsalable in addition to considering the account high risk. I am having trouble coming up with a good analogy. Maybe in porn - You can be a high risk porn account and be approved for porn sales. However, you would still not be able to sell illegal porn. We are now in the same situation except that our product is not illegal.

 

[captainprophesy]

Hi Jessica... first off I want to say Thanks again for keeping us posted on this ridiculous issue, it sure helps having someone hre to answer questions and to keep things in perspective.
My question is this:... whats the best time to call you to place an order?