Understanding Credit Underwriting
Before a merchant can begin accepting payments, CDE must complete an underwriting review. Underwriting is the process of evaluating the business, its owners, how it operates, and the products or services it sells. Because card transactions can later result in chargebacks, refunds, fraud losses, or unpaid fees, this review helps confirm that the merchant is legitimate, financially responsible, and operating within CDE’s, the acquiring bank’s, and the card networks’ requirements. Note: CDE does not process for businesses deemed high risk. Please review the attached CDE Credit Underwriting Guidelines to understand the business types supported and not supported.
Underwriting is not based solely on a credit score. The review may also consider the merchant’s industry, processing history, expected sales volume, average and maximum transaction amounts, delivery timeframes, financial condition, website, refund policies, and supporting documentation.
Restricted businesses are not automatically declined, but they present additional risk or require specialized approval. These merchants may be asked to provide additional documents, maintain reserves, accept processing limits, or meet other conditions before an account can be approved.
Prohibited businesses cannot be boarded because their products, services, or business practices fall outside CDE’s risk tolerance or are not permitted by the acquiring bank, card networks, or applicable laws and regulations. A prohibited merchant should not be promised approval or submitted under a different business description.
CDE is also required to collect Know Your Customer (KYC) information. KYC helps verify that the business and its owners are who they claim to be and allows us to identify the individuals who own or control the company. This generally includes legal names, addresses, dates of birth, Social Security numbers, government-issued identification, ownership information, business formation documents, and banking details. KYC requirements help prevent identity theft, fraud, money laundering, and the use of payment systems for illegal activity.
Agents play an important role in setting expectations and collecting complete, accurate information. Never omit, alter, or minimize details to make an application appear more favorable. Providing complete documentation at the beginning of the process helps underwriting make an informed decision and can prevent unnecessary delays.