New FDA Regulations Affect Online Vape Credit Card Processing

April 17, 2017

It seems that the U.S. Food and Drug Administration (FDA) is finally beginning to crack down on the growing vape and e-cig industry, after it announced last year that all e-cigarettes and other vaping products will now be regulated in the same way as cigarettes are under the 2007 Family Smoking Prevention & Tobacco Control Act. The law now applies to all electronic nicotine delivery systems (ENDS) and other vapor-producing products, meaning that all retailers and manufacturers of these products must now meet certain regulations in order to sell their products.

By extending its authority over e-cigs and vape products, the FDA is forcing both retail and online merchants to incur many additional expenses related to bringing their business in line with the new regulations. As these regulations cover the manufacturing, labeling, marketing and advertising of any e-cig related products, the expenses tend to pile up quite quickly.

Unfortunately, the new FDA regulations have also led to MasterCard changing its policy concerning online merchants. Previously, all companies who sold tobacco and tobacco-related products were required to prove their legal compliance and pay a $500 yearly registration fee in order to accept credit cards. However, the revised policy means that all vape merchants who wish to accept MasterCard payments are required to pay this yearly fee. Worse still, it seems certain that Visa and American Express will soon follow suit.

What the New Regulations Mean for Your Vape Business

One of the biggest problems associated with the FDA regulations is that they will make it much harder for merchants to continue to accept Visa and MasterCard payments. While $1,000 in total yearly registration fees will definitely have a negative impact on your company’s bottom line, there are many hoops you’ll first need to jump through before you can even get to the registration process.

In order for a merchant to register with one of the credit card companies, they’ll need to make sure that all transactions are properly age-verified. This means restricting sales to anyone under the age of 18, and, for online merchants, ensuring that all products require a signature from a legal adult upon delivery. As well, merchants also need to obtain a letter from an attorney legally verifying that the business is in compliance with all state and federal regulations.

The problem is that even paying the registration fee doesn’t actually entitle you to accept credit card payments, as you’ll then need to find a credit card processor that’s willing to underwrite your business. Despite the work you’ve put in to become complaint, the credit card processor is the one who has the burden to prove it.

Unfortunately, many credit card processors are currently unwilling to take the risk that goes along with it, meaning many online retailers may be left without a way to accept online credit card payments or will be forced to pay much higher fees in order to do so. For this reason, the FDA regulations seem certain to have a major impact on the industry, both in the short and long term.

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