When securing merchant accounts in Panama, high incidence rates of chargeback and sluggish collections can lead to your account’s closure.  As a rule, chargeback rates should remain within the 1%-2% range.  Otherwise, the account will definitely be reviewed for closure.

In some occasions, especially if the rate does not exceed 3%, the merchant account company may not close your merchant account but they will try to work with you to bring the chargeback rate down.  This is not guaranteed in any way, however, and remains solely under the discretion of the merchant accounts service provider involved.

Bringing Chargeback Rates Down

This can be accomplished through order verification through telephone calls as well as through putting up blocks on proxy servers and geographical regions with consistently high rates of fraud.  If your company’s chargeback incidence is high, then you are cautioned against opening a Panama merchant account for it cannot work in your favor.  You risk merchant account closure with high rates of chargeback.

Risks for Merchants

There are unscrupulous companies that offer offshore merchant accounts services to companies with high chargeback rates.  Watch out for these companies because there are cases when they just keep your funds for their own profit – either by keeping your funds, or tying up your funds while they generate income for their company.

For instance, such companies will make you sign a contract that tells you to keep your chargeback rates down.  Specifically, your chargeback rate must stay within the 1% threshold.  However, in the same contract you will see a clause that states the merchant account company will acquire 3% on your chargebacks.

If you exceed the 1% limit, the contract will state that your account will be closed.  You go on with your business and start delivering the goods.  You were advised that payments will come in two weeks with another two weeks for holdbacks.  After the fourth week, some delays might come up which extends the waiting time to another two weeks.  While all these are happening, you continue delivering the goods but funds haven’t been credited on to your account.

You then get the notification that your account will be closed and held for six months.  Many high-risk merchants will let the merchant company get away with it because it’s too much trouble to go to that country to file charges and spend more money in the process.  In your case, you will perhaps just hope for the best and wait out the six months for the funds to be released.  However, things start getting nastier at the close of the six months with the merchant accounts provider claiming that yours is a fraudulent company.  The merchant account service provider then continues with its scam and holds your funds for a few more months.

From this illustration, you will notice that the unscrupulous merchant account company has already set you up to fail from the start and that the merchant account company stands to get all the gain.  It is therefore very important that you consult a trustworthy lawyer who knows about Panama and merchant accounts processing before you sign any contract with a merchant account provider.

If something like this happens to you, you can get the help of Panama-based lawyers that specialize in merchant accounts processing – provided that not a great amount of time has lapsed since the incident.  By seeking legal help, you should be able to recall a good amount of your funds from your merchant account company.