Yes and the risk is increasing very fast. Regulators across the United States are actively pushing payment service providers and financial institutions and asking them to take stronger action against illegal tobacco and e-cigarette sales. This basically includes putting pressure on major payment companies and asking them to monitor the system and even terminate merchants that are not to be compliant with the federal and state laws.
For vape, nicotine and tobacco merchants, this simply means that payment processing is no longer just a technical set-up but it is also a compliance-driven survival factor.
Many e-cigarette products that are sold online are not authorized by the FDA and that makes them illegal in certain cases. Additionally, certain laws like the PACT Act requires age verification, reporting, labeling, and fully regulated compliances are also important. Failure to meet these government regulations, laws, and policies requirements can actually lead to account shutdown, frozen funds, and even blacklisting by payment service providers.
Currently, a lot of merchants that sell tobacco, cigars, vapes, are getting shut down and this is because of certain reasons.
Payment processors are constantly under pressure and all they are trying to do is prevent unlawful or unverifiable sales. They are trying to block underage access, which is absolutely a genuine step. Payment processors are required to follow the regulations policies made by state and national governments. They want to ensure that payment processors, they are basically trying to ensure that they follow federal and state laws, which they should do. And they are also trying to avoid any regulatory penalties.
This simply means that even legitimate businesses can sometimes face disruptions if their compliance setup is weak or unclear.
How merchants can stay protected in such a scenario, this might be the question that you might be wondering about. So the answer is simple. To operate in a safe manner, any merchant that works in these industries should work with a high-risk payments processing specialist. The merchant should clearly display compliance policies on their website. They must implement age verification and geo-restrictions on their website. Along with that, they should ensure that the products, they sell must meet local, national, and international regulatory standards and should never violate any policies.
If you are currently facing any problems with your merchant account stability. Especially if you are selling vape or tobacco related products, then you should work with an experienced partner that understands high-risk compliance requirements.
QuadraPay can potentially connect you with such specialist partners. We can help you find a provider that comes with reduced shutdown risk and long-term scalability solution. However, keep in mind, they perform deep underwriting and risk evaluation. If you are operating in a regulated industry, then remember that the right payment setup is not optional for you but it is extremely critical for your survival.