What is Merchant Account Slamming

According to Websters Dictionary, slamming means ‘a critical attack’ or ‘shutting forcefully.’ In the credit card processing industry, slamming is the act of stealing the identity of legitimate merchant account providers to scam the merchants, pretending to be their current payment providers. This is the most simple way merchant account slamming can be explained.

Although there are many different ways of slamming. Merchant account slammer lead merchants to believe that they are being contacted regarding their processing services, however, they can end up putting sensitive business information at stake.

How is a Merchant Account Slamming Done?

As the world is progressing, so are the scammers. As merchants are taking measures to protect their businesses with updated security functions, fraudsters invent new tactics to execute consistent data breaches.

A merchant is approached by someone on a call or in person, claiming to be from their service provider, bank, or credit card processor. Once the merchant is convinced they are talking to their service provider, the scammer tells them they need to update their terminal. The usual reasons scammers give are; a new security policy, PCI non-compliant equipment, or incompatible with the updated service.

Next, the scammer takes the merchant’s permission to reprogram their terminal. As they pretend to solve the issue, the fraudsters set up the terminal with their own company without the merchant’s knowledge and get some paperwork signed. The merchant thinks their equipment is updated and does not suspect anything. By the end of the month, when they receive two bills, the merchant realizes they have been scammed.

One bill is from the actual service provider they signed a contract with, and the other is from the fake company that slammed them. Here are a few basic tricks that scammers use to attack a business.

  • Sending you some documents claiming them to be regular forms that are actually binding contracts
  • Pretending to be in a hurry, rushing you with less time to think, and tricking you into signing a legal document
  • Offering to cancel the contract anytime without any charges and later disclosing that the contract is long termed and you now have to a hefty ETF to cancel it
  • Using actual names and references to make you believe they are from your actual service provider

Effects of Merchant Account Slamming on a Business

merchant scammed

Merchant account slamming is an updated version of one of the oldest scams. In the early days, scammers used to switch people’s telephone lines, setting them up with another telephone service provider without authorization. Now, people are being scammed for their merchant accounts instead of telephone services.

Slamming is hard to identify because these interactions sound authentic and professional. These people are not like your usual scammers. They are experienced enough to avoid apparent giveaways and use believable bluffs for merchants to trust them enough to allow them near their system. They even come with comprehensive research about your actual service provider and use references to make them believable.

There could be multiple possibilities resulting from this scenario. The scammer may be a payment processor that signed you up for their services, a criminal taking your hard-earned money or a hacker using your merchant account to skim cardholder information. Either way, a business can be severely affected by slamming.

Doubled Fees

Once your merchant account is slammed, you have two merchant accounts with two merchant service providers. This results in a double fee as you have to pay your original payment processor, and the fake one is also taking money from you for the unwanted service. You are subjected to high chargebacks and network fees, and it is improbable that you will get back the money they already took without consent.

High Termination Fee

These scammers have thought everything through and know what they are doing. Once you realize you are being scammed, you will want to cancel the contract with the fraud company. Next thing you know, you are charged a high termination fee to cancel the contract that you didn’t want in the first place.

TMF List

Most service providers make their merchants agree to the term that they cannot use another payment processor as long as they are bound in contract with them. Once your original service provider finds out about your second account, they might accuse you of fraud and terminate your account for breaching the contract. Merchant account providers put such merchants in the Terminated Merchant File. It is a database containing the list of businesses that the provider terminates. MSPs check this database before signing up new merchants, and merchants in the file are lesser likely to get registered with reputed providers

Stuck with a Fraud Company

At first, a merchant must spend resources to find out who slammed their account. Later, they are left with two choices; to terminate the contract with a hefty fee or sue the fraudulent provider. Either way can prove very costly. In case of a lawsuit, there is no guarantee of winning the case, and they might be forced to keep paying the deceptive payment service provider.

Potential Criminal Offense

Apart from signing up for a merchant account for their services, another reason for slamming a merchant account is to use it to scam other businesses and commit fraud. Without knowing what you got yourself into, you will end up with criminal charges against you for the crimes done using your merchant account.

Merchants will have to go to extreme lengths to prove not to have any role in the fraud and clear their record; meanwhile, their business will take a hit.

Effect of Merchant Account Slamming on Service Providers

It’s obvious how slamming damages a merchant’s business but also leaves an imprint on the service provider companies. Merchant service providers spend most of their time, effort, and resources on maintaining their clientele. When a scammer steals a merchant account, they steal a client from the authentic service provider. In return, the processor loses revenue, affecting them like their merchant’s business. Sometimes, it takes months to regain the losses of losing just one client.

What to do if a Merchant Account is Slammed?

Scams can be tricky to handle, and there is a high chance the merchant is unaware of their account being slammed. Getting your account free from the unwanted contract can be difficult, but there are ways to make it happen.

To prevent merchant account slamming, the first thing that a merchant should do is to research who could be the scammer. It helps to recall recent business activity to know if someone came to reprogram the terminal or was given a document to sign. Any unusual activity should be investigated to help the merchant find the company that slammed their account. After finding out the scammer, you can either negotiate your way out of the contract or sue them, depending on your situation. In any case, a merchant must take serious action and report the fraud.

Contacting your original service provider and discussing your situation can be beneficial. If your provider finds this out through you, it is much less likely that they will assume you breached the contract. It is better to be ahead of the situation than to be accused of fraud and lose an authentic payment processor. You may get your account back and not go through the tiring process of canceling two contracts and finding a new service provider.

Precautions to Avoid Merchant Account Slamming

Prevention is always better than cure. As hard as it is to get out of the slam situation, there are easy ways to prevent the experience altogether if a merchant is cautious enough. Knowing your customers and partners is critical in preventing your business from getting caught up in fraudulent activities. A merchant should always ensure they are dealing with company officials.

If an agent approaches you for information, ask them questions to ensure they are from your service provider. It would be excellent if you could verify the employees’ authenticity before allowing them to make any changes to your terminal or program. Merchants should remember that it is improbable for banks and credit card services to contact them for equipment updates. Moreover, MasterCard or Visa do not sell their services directly. It should be enough to make you suspicious.

If someone asks you to sign a document, however credible it looks, do not sign anything without clarifying its source and authenticity. Make sure to take all the time you need to read and understand the contract before signing. Ensure that the vendor answers everything and you are positive that they are not deceiving.

If you receive an unsolicited call from a person claiming to be a sales representative, do not trust every word they say. Backtrack the caller’s phone number, verify their background, and do not agree to anything on the phone. Contact your service provider to cross-check if the caller was their sales representative or not. If a sales representative contacts you in person, ask them to provide evidence of their employer before allowing them to update your system. In any case, be very suspicious and cautious about trusting anyone with your merchant account.


While you may think you know your provider well and will not fall victim to such a scam, people with malicious intent are more cunning than ever. While these extra steps may seem mundane and precautionary to prevent merchant account slamming,  they are all the more worthwhile when you consider that your business is on the line.

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