5 Dishonest Tactics Credit Card Processors Use To Get More Of Your IncomeYou can find tens and thousands of mortgage processors performing on a contract basis in the United States. The SAFE Mortgage License Act that passed in July 2008 requires contract mortgage processors to be licensed by July 2010. So how exactly does the brand new law affect contract mortgage processors? Obtaining mortgage loan originator (MLO) licenses in multiple states can be extremely costly. What can a contract mortgage processor do to comply and not break the financial institution?
Let's first consider the definition of a contract mortgage processor under the SAFE Mortgage Licensing Act. The Act defines a mortgage processor being an individual that gathers documents from borrowers and submits the documents to a lender, but does not take residential loan applications. The Act then continues on to convey that the mortgage processor is exempt from mortgage loan originator licensing as long as they're a w-2 employee of only one mortgage company. Thus a mortgage processor that's 1099 and/or processes loans for several mortgage company should be licensed as a mortgage loan originator (MLO) and is recognized as a contract mortgage processor. If you are defined as a contract processor, then what are your choices for obtaining a license in each state you process loans?
Option 1
You are able to elect to become pay way processors a w-2 employee of only one mortgage company and process mortgage loans for just this 1 company. This is probably not the perfect situation for most contract mortgage processors, but it may be the only choice for some. The expense of licensing can be expensive and a license is necessary in each state you process loans. Also, as we shall discuss shortly, you may need to acquire a mortgage company license too. This is even more expensive than obtaining just the mortgage loan originator license.
The problem to this approach is obvious. You can't continue to process mortgage loans for the other customers. Also, it may be hard to find a company that will hire you on a full-time w-2 basis. Most smaller companies just do not have the resources to maintain a full-time processor on staff.
Option 2
You are able to choose to acquire a mortgage loan originator (MLO) license in each state you wish to process loans in. Then you can have your primary customer sponsor those mortgage loan originator licenses. To get a mortgage loan originator license, you will need to complete 20 hours of education, two tests, fingerprinting, credit check, and pay a credit card applicatoin fee between 0 and 0 per state. Then you can have your primary customer sponsor your mortgage loan originator license. This enables you to process loans for your primary customer on a 1099 contract basis. The issue is when you wish to have other customers, you will have to put up your contract between your sponsoring primary employer and the other customers. So when you need to have paid by your other customers, the other customers will have to pay your primary customer and your primary customer could pay you. This obviously poses an enormous problem for most contract processors since it is very unlikely you will see a principal customer that'll be ready to sign processing contracts with your other customers. However, this is one way the states are saying it should be done. Some states might be implementing this slightly differently, so I would suggest contacting their state or a licensing service to determine how their state is interpreting these requirements.
Option 3
You are able to choose to acquire a mortgage company license and a mortgage loan originator (MLO) license in each state you wish to process loans in. This is actually the ideal situation, because then you do not need to be limited by only one employer as in option 1 and you do not have to really have a primary customer sponsor you and pay you for the other customers work as in option 2. However, this is actually the most costly option. It usually costs about ,000 to ,000 to use for a mortgage company license per state. And some states have net worth requirements, experience requirements, and bonding requirements that can be difficult barriers to overcome.
If you are able to go this approach, you'll actually be able to prevent the mortgage loan originator licensing in most of the states by paying yourself as a w-2 employee of your contract processing company, but the expense will still be much higher. If you are thinking of going in this way, you will want to get licensed only in states you plan on processing ten or maybe more loans in each month. In reality, most people that go this route will benefit from having a couple of contract processors work with them to offset the costs.
If ever there was an industry that attracts greed it's charge card processing. I suppose that's what goes on in a industry that processes significantly more than trillion dollars in volume annually - everyone wants a bit of the pie. Well the greed has gotten beyond control, and unfortunately it's the merchant who usually ultimately ends up spending money on it. This information exposes 5 deceitful tactics charge card processors use to line their pockets at their merchants expense.
Tactic #1: The "Rate Game"...
Sales telemarketers like to call business owners and promise to give them a "lower rate", and to "save them money" if they will switch processors.
Question: How would they possibly know they'll be able to save money before they've even viewed a statement and seen what you are currently paying?
The solution is - they can't!
But here's the dirty little secret: they don't really care what your statement says because generally they don't really want to save money anyway. It's amazing how many merchants say they'd switched processors for less rate - only to find they ended up paying comparable total costs as before when it absolutely was all said and done.
The reason why this can happen is because there are so many variables to a processors rate structure, that discount rates can quickly be manipulated to offer savings in a single area, while getting back together for it in an alternative area altogether.
An example of this really is supplying a lower discount rate, and then getting back together for it in transaction fees, statement fees, annual fees, PCI fees, or'every one of the above '.
The perfect solution is? Demand that your processing rep explains VISA and MC's Interchange Rates (which can be downloaded from each of their respective websites), and can justify what they want to charge your account fully for, based on published interchange rate charts.
Tactic #2: The Binding Contract...
Another trick processors use is to lock you into a 2,3, or even 5 year contract - without verbally suggesting they'd done so. Sure, you could have found it somewhere in the details of your processing agreement, but it's rare for you to definitely read page after page of small print "legalese" when jumping through most of the hoops of filling out a contract and playing a well skilled, friendly salesperson.
Similarly, at the end of the first contract term, another devious trick is to include a clause somewhere in the contract stating that unless the processor is notified in writing at least 30 days ahead of the expiration of the first processing agreement, the contract will automatically renew for an amount of 1 year.
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