FDA Plans E-Cigarette Regulation: Impacts Merchants, Accounts

May 15, 2014
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For many years, the e-cigarette industry, estimated value at $2 billion, has gone largely unregulated by the US Food and Drug Administration. The FDA has put forth a new plan to install the regularization and oversight of the e-cigarette industry. Merchants and health group advocates have mixed reactions to the FDA’s plan, but for an e-cigarette merchant’s business the FDA’s decision will have a direct impact on you and your merchant accounts.

The FDA’s new plan is like the plans for most other industries. E-cigarette companies will need to register their products, disclose the product ingredients, and wait for the FDA to review new products before marketing them. This should bring stability to an industry that has been rife with inconsistent goods and services.

Yet, at the core of the new FDA plan is the stipulation that e-cigarette merchants and companies would have to wait for FDA review before stating that a product reduces any risks.

This requirement is important because one of the cornerstones of marketing e-cigarettes is the perceived health benefits of vapor-based tobacco as opposed to smoke-based tobacco. Health studies conducted on the differences between cigarettes and e-cigarettes are underway but not complete. Until research is completed, health benefits cannot be verified by the FDA—nor marketed by e-cigarette merchants.

Health advocacy groups still raise concerns over nicotine levels in e-cigarettes as previously unregulated e-cigarettes could contain dangerous quantities of nicotine for minors. Advocacy groups were also critical of the time it took the FDA to propose any form of regulation—so long in fact many local and state governments began independent legislation to regulate e-cigarettes.

What does this mean for you and your e-cigarette merchant account? Some trade groups from within the e-cigarette industry claim the additional paperwork and red tape will hurt small businesses. Yet, the status of e-cigarette companies as high risk is unlikely to change. Your e-cigarette merchant account will still likely need to be processed by alternative sources and not traditional banks.

Regulations and legislation is important to monitor any industry, but for the electronic transaction side of the e-cigarette industry the FDA’s decision is by no means a sweeping or unexpected surprise.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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