Compliance in Payments is Not a Gray Area

​​So, what is the problem?
When it comes to payment processing, state insurance departments have varying regulations that prohibit agents from charging additional fees. Individual state rules determine how the premium funds must be handled. In addition, credit card companies have their own specific regulations. These multiple layers of complicated regulations make it difficult to know if you are legally compliant. It’s important that you choose a payment provider that ensures you are operating within the law at all times.

Here are two documented examples from the State of New York:

Date: 9-15-2006
Re: Credit Card Service Company
Question Presented:
May an insurance agent or broker conducting business in New York contract with a credit card service provider that will accept an insured’s premium payment by credit card on the agent or broker’s behalf and charge the insured a service fee for the transaction?
 
Conclusion:
No, an insurance agent or broker conducting business in New York may not contract with a credit card service provider that will accept an insured’s premium payment by credit card on the agent or broker’s behalf and charge the insured a service fee for the transaction.
 
Date: 7-21-2006
RE: Credit Card Surcharge
Question Presented:
May an entity that provides a service to insurance companies that permits policyholders to pay their insurance premiums by credit card charge those policyholders an additional fee to cover credit card and other service expenses?
 
Conclusion:
No, an entity that provides a service to insurance companies that permits policyholders to pay their insurance premiums by credit card may not charge those policyholders an additional fee to cover credit card and other service expenses.

Why is Compliance Important?
Operating your business with disregard for, or ignorance, of the law is never an acceptable business model. Violating the rules and regulations may lead to card companies taking away your ability to accept payments and/or levying fines of up to $25,000 per violation.
 
Three Steps for Remaining in Compliance
1. Educate yourself about your state’s specific laws and regulations.
2. Fully understand the credit card company’s rules.
3. If you are in doubt, always ask your payment provider to clarify state laws.
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Questions to Ask Your Payment Provider

Does my state allow agents to charge additional fees? Are you charging me monthly to charge my customers a payment fee?
If you are not allowed to charge someone a fee in your state, contractually outsourcing the charging of the fee may not be compliant.

Does my state have a “convenience fee” law?
Make sure your payment provider satisfies the requirements of any convenience fee laws. Convenience fee laws are state laws, not guidelines. Violating them could come with significant consequences.

Are the premium funds allowed to be commingled with the fee funds?
If your state does allow agents to charge additional fees, make sure the premium funds are allowed to be commingled with the fee funds.

Have a conversation with your provider if you have any doubt that their model is in compliance with laws and/or regulations in all of the states you do business in.

By understanding the laws and regulations for your state, you can confidently operate your agency knowing what you can and cannot do when it comes to payment processing.

By Duke Williams, Founder of Simply Easier Payments