For businesses, the Terminated Merchant File (TMF) is an unwelcome designation analogous to a “no-fly list” for credit card processing.
This blacklist is maintained by Mastercard. Alternatively known as the MATCH List, seeks to safeguard banks from extending acquiring services to high-risk enterprises.
In certain circumstances, such as excessive chargebacks, data breaches, fraudulent activities, or violation of regulations, a merchant’s account may be terminated. This termination leads to the business’s name being added to the TMF, marking it as a high-risk entity.
This system, though crucial for risk management in the banking sector, can have significant repercussions for the businesses that find themselves placed on the TMF.
Consequences of Being Added to the TMF
The effects of being listed on the TMF are extensive and can severely compromise a business’s operations. Most notably, the TMF designation can lead to the inability to process payment cards, which could severely curtail revenue streams and impact customer retention. Beyond that, there are financial ramifications in the form of potential fees and fines. Furthermore, the damage to the business’s reputation can be long-lasting and far-reaching, as its status as a high-risk entity could deter potential partnerships and opportunities.
Acquirers and processors within the Mastercard network routinely consult the TMF or MATCH List prior to onboarding a new merchant. Should a merchant’s name appear on this list, their application for payment processing services is typically rejected. This practice is a risk management tool that helps financial institutions avoid potential losses and maintain the integrity of their payment processing ecosystem.
Being listed on the TMF is not a short-term problem; a business is typically kept on the TMF for a full five-year term. There are very few ways to remove the business from the list before this period expires. For example, proving a mistake was made in the original TMF placement. Merchants may also be removed from the list if they were added for PCI-DSS noncompliance, but have since become compliant.
Why Was a Merchant Added to the TMF?
Businesses may be added to the TMF for a variety of reasons. It could be due to a breach of the payment processor’s terms, excessive chargebacks, fraudulent activities, or violating legal or regulatory requirements.
High-risk industries, such as adult entertainment, travel, and telemarketing, are more susceptible to being placed on the TMF due to the higher probability of chargebacks and fraud. However, any business that fails to adhere to the payment processor’s guidelines and standards, or exhibits patterns that suggest financial instability or unethical business practices, can find itself at risk of being listed on the TMF.
The specific reasons why a merchant may be added to the Terminated Merchant File are explained using a handful of MATCH List reason codes:
- Reason Code 01: Account Data Compromise
- Reason Code 02: Common Point of Purchase
- Reason Code 03: Laundering
- Reason Code 04: Excessive Chargebacks
- Reason Code 05: Excessive Fraud
- Reason Code 06: [Currently unused]
- Reason Code 07: Fraud Conviction
- Reason Code 08: Mastercard Questionable Merchant Audit Program
- Reason Code 09: Bankruptcy, Liquidation, Insolvency
- Reason Code 10: Violation of Standards
- Reason Code 11: Merchant Collusion
- Reason Code 12: PCI-DSS Non Compliance
- Reason Code 13: Illegal Transactions
- Reason Code 14: Identity Theft
This underscores the importance for businesses to maintain transparent operations and remain in compliance with all industry regulations.
How Do Merchants Avoid Being Added to the Terminated Merchant File?
While the consequences of being listed on the TMF are daunting, businesses can take proactive measures to avoid this fate.
Best practices for merchants include addressing concerns from processors or acquiring banks promptly, strengthening their data security measures, devising strategies for chargeback prevention, and managing chargeback risk effectively. By taking these steps, businesses can protect themselves and ensure their ability to accept credit card payments is not compromised.
