Credit & Credit Cards
In Part 1 (page 36 – August issue), I categorised risk into five categories, namely; 1. PEOPLE, 2. MONEY, 3. LAW, 4. SERVICE and 5. ECOLOGY. I will be dealing with the risk profile of each, i.e. broadly speaking the areas of risk that any business is exposed to can been allocated under these five categories.
In Part 2, (page 22 – September issue), I covered the category of ‘People’ under four sub-categories: Staff (discussed in Part 1); Third party service providers (‘TPSP’); and Business Associates.
Part 3 (page 24 – October issue), continued with ‘PEOPLE’ as Customers.
Part 4 (page 27 – November issue), started the discussion on the 2nd category, namely ‘MONEY’ in terms of CASH and CHEQUES.
In Part 5, we look at CREDIT and CREDIT CARDS.
Rule number 1: Do NOT grant credit! This applies even if the client/potential client is your best friend and not only because it can ruin a friendship!
Rule number 2: If you do grant credit for business reasons/considerations e.g. it is a good client and you want to retain the business, then make sure that you have a proper, legally compliant credit application form (‘the Form’) – the latter entails/the form should address inter alia the following:
• The National Credit Act (NCA) must be addressed with reference to such issues as incidental credit; the number of credit transactions you enter into per annum and your client’s turn-over;
• Clients’ potential over-indebtedness;
• When entering the name of the party to whom credit may be granted (‘the Applicant’), ensure that the name is the registered name and not the ‘trading as’ name plus registration number;
• The entire Form must be completed in full;
• The Form must be signed by a duly authorised representative of the Applicant;
• The Form must include a Consumer Protection Act (CPA) compliant reference to your Terms and Conditions (T&C).
Do NOT start doing business on credit until your finance/credit department has approved the credit and added requirements such as annual limits and/or additional T&C’s – until then ALL business should be CASH ONLY!
Although this form of payment is pretty much common practice, it is HIGH risk and you must NEVER let your defences down, take short-cuts or ignore the prescribed and recommended safe guards! Fraud is unfortunately king and the perpetrators are past-masters at outwitting the system and the retailer, always seeming to be one step ahead of the safeguards, and if you are not extremely careful, you will incur substantial (irrecoverable) losses.
If you accept this form of payment, you MUST comply with the following:
• The requirements of your merchant agreement;
• The PCI Security Standards Council rules and regulations (see www.pcisecuritystandards.org);
• The IATA rules and regulations;
• Your association’s Code of Conduct.
You should also implement as many as possible of the following safeguards, many of which are common practice and/or contained in the above and/or recommended by the banks:
• Check the client signature with that one the back of the card;
• Check for false card indications;
• Bear in mind that when the bank authorisation code is obtained it does not mean that there are adequate funds in the card;
• Beware when (1) The card holder/payer is not the traveller; (2) It is a abnormally large amount; (3) It is an international journey; (4) It is for multiple passengers/a group; and (5) It is a booking made late on a Friday;
• Use a lodge card wherever possible;
• Obtain a copy of the card holders identity document.
If you use a credit card authorization form it must inter alia:
• It must ask all the right questions;
• It must always be completed in detail and signed (Refer discussion on credit);
• It must incorporate or at least refer to (in a ‘CPA acceptable manner’) your T&C.
Disclaimer: This article is intended to provide a brief overview of legal matters pertaining to the travel and tourism industry and is not intended as legal advice. © Adv Louis Nel, ‘Louis The Lawyer’, December 2014.