In November 2017, the Florida-based supplement company, NextGen Nutritionals, LLC, settled its false advertising charges with the Federal Trade Commission. The FTC stated the company advertised that its supplements could do everything from prevent and treat HIV/AIDs to extreme weight loss but didn’t have any proven evidence to back up their claims. Part of the settlement prevents the company from misrepresenting claims and using fake testimonials and certification seals in the future.
Unfortunately, this isn’t the FTC’s first charges against a supplement business and it won’t likely be its last. Over the years, nutraceutical businesses have gotten in hot water for offering false claims about weight-loss, muscle-building, and wrinkle-reduction products, failing to properly label products or disclose all of its products’ ingredients, advertised unsubstantiated health claims, and used phony celebrity endorsements to sell their health and wellness products.
The vitamin and supplement industry also is known for using a free sample tactic, which requires a customer to pay a one-time fee plus shipping costs. Customers believe they are getting good deals but what they are really doing is they are enrolling themselves in monthly subscription programs for specific periods of time in exchange for the free product. What customers also don’t know is when they go cancel subscriptions, they are hit with early-termination fees. When customers find out, they dispute the charges to their credit or debit card companies, which triggers a chargeback. Chargebacks are costly to banks, processors, and merchants.
These scams and tactics, as well as that the Food and Drug Administration doesn’t regulate dietary supplements, hurts legitimate nutraceutical businesses. When businesses want to sell their products and services and take credit card payments from customers, traditional financial institutions don’t want to help them. Any business that wants to safely and securely process debit and credit card payments, must have a merchant account. Scams and a lack of clear regulations have colored supplement merchants as “high risk,” leaving banks declining merchant accounts for these businesses. In fact, some won’t even entertain credit card processing solutions to these types of businesses whether they are legitimate or not. This has left many responsible, honest supplement merchants paying high fees to process debit and credit card payments or going belly up because they can only accept cash and check payments. So how does a business get a high-risk supplement merchant account when they seem to have the chips stacked up against them? Follow these five simple strategies to get you in the best shape to get the account solution you need.
1. Be upfront about your policies
As previously mentioned, some common billing methods, such as continuity building, is risky. This type of billing results in excessive chargebacks from unsatisfied customers because many customers may not realize they will be billed on a recurring basis or forget that they signed up for a product. Merchants who opt to bill customers another way or avoid signing people up by offering them free samples of products will be helping themselves down the line. To cut down on potential chargebacks, supplement merchants must be clear about their terms and conditions. Policies should be clearly displayed on their websites and included in any purchase emails.
2. Turn negative feedback into appropriate customer service changes
Too many negative reviews aren’t attractive other customers or merchant account providers. A large number of scathing reviews shows processors that you are doing something wrong. You either don’t know how to handle customer complaints or you need to adjust your business model.
A simple way to get this under control is to read and think about the reviews people are posting. Is there a common thread? Are people complaining about being unable to reach a customer service representative? Are they getting billed for the same product twice in one month? Do people not understand the terms they signed up for or how to cancel a contract?
Take whatever you find and adjust your practices to show customers you care about their satisfaction. Also, respond to customer reviews. Even if you can’t reach a resolution, it will show customers you are willing to listen.
3. Good customer service also cuts down on chargebacks
For some businesses, the only factor that keeps them from a standard-risk and a high-risk merchant account is their past histories of excessive chargebacks. You probably don’t realize it but being open and transparent with customers, answering them promptly, and issuing refunds when necessary will decrease chargeback ratios.
To get there, you need to train your staff to offer good customer service. They need be polite, professional, and knowledgeable. Staff needs to know when it time to give a refund is better than anticipating a chargeback.
4. Take measures to decrease fraud
Supplements are expensive. The higher items cost, the more attractive they are to cybercriminals. To cut down on purchases made with stolen credit cards, require customers to provide the CVV codes, which are the three or four-digit number on the back of credit cards. This will verify that the customer is in possession of the physical card.
If a purchase looks suspicious, treat it that way. If a person orders an unusually large order or tries to have something shipped to an address that doesn’t match the billing address, be cautious. Review the information the customer provided and then, reach out to the person once you decide. Another option is to request another credit card from the person. If you explain to customers that you are making that request for their protection, it should not make them upset.
5. Stay above the law
Don’t try to up sales by overstating the benefits of your product. Comply with all rules and regulations relating to advertising and labeling of supplements. Know what is in your products and make sure the manufacturer is disclosing all of the ingredients they use. If you are transparent about what you are selling, it will be more difficult for consumers to dispute a charge. Following the rules is best way to get and maintain a high-risk supplement merchant account.
A final note
Obtaining and maintaining a high-risk supplement merchant account is difficult but not impossible. eMerchantBroker.com (EMB) understands the challenges of trying to maintain a supplement business. So, when you are ready to find a trusted, responsible credit card processor, contact us to find out about our high-risk supplement merchant account solutions.