We’re pleased to be partnering with Ken Kirschenbaum to bring you some of the questions he has been asked regarding legalities with licensing and contracts. You can sign up to receive emails from him with all of the questions posed and his replies by visiting his website.
Today’s question: I don’t see any fee in the Standard Form Agreements that can be charged if a credit card is declined. We seem to be wasting a lot of time processing a credit card that gets declined. Then we have to chase the customer. Can we add some fee for this? I’ve heard of a bounced check charge, but not for declined credit card.
Good question; I agree that a charge for bounced check may be appropriate, especially if your bank is charging you. Although that is not in the Standard Form Agreement, it can be added in the contract. I asked Tom Aronica, president of Biller Genie and Skybank Financial. Here is his response:
I’ve never heard of a charge for a declined credit card transaction in the credit card world.
With ACH, there is something called a “representment” fee which is similar to that of a bounced check fee. Generally we see this because ACH transactions are not real time and fees are assessed at the top and passed through for NSFs [non-sufficient funds] and other rejects. With credit cards, the declines are real time so foreseeably you can simply ask for a different form of payment or not deliver the product or render the services. I suppose if the argument is “a failing transaction will cost me time to remediate and thus you should pay for that time”, and that is clearly documented in the contract, that you could charge an “administrative” fee for this service, but it’s a stretch and I would bill it as a separate invoice from the normal transaction that was declined.
The way we handle this in Biller Genie is to let the auto-pay transaction decline and then our system starts to automatically follow up on it until we collect payment, and if it ages beyond 30 days, we start to assess finance charges which accrue until the invoice is paid.
Let me know if that helps, I hope everyone is safe!