Practice Area
High-Risk Merchant Reserve Recovery
High-risk merchants can have substantial funds tied up after an ISO, PayFac, or acquiring bank terminates the merchant account. Future settlements may be suspended, funds already in the settlement pipeline may be diverted into reserve, and existing reserve balances may continue to be held. Portal access may be cut off at the same time, leaving the merchant with little useful information about the funds.
Rome LLP represents high-risk merchants seeking to recover reserves and settlement funds held after termination. Our clients include nutraceutical and dietary supplement merchants, peptide sellers, adult-content businesses, subscription merchants, and other businesses operating in high-risk verticals.
The firm has recovered tens of millions of dollars in wrongfully withheld reserves and settlement funds for merchants and payment platforms.
Post-Termination Reserve Holds
Merchant agreements and reserve addenda commonly permit the acquiring side to retain funds after termination to cover chargebacks, refunds, card-brand assessments, and other forward risk. The stated holding period is often 180 to 270 days or longer, measured from the termination date, the last transaction, or the last chargeback.
The agreements also commonly give the acquiring bank broad discretion to retain funds for as long as reasonably necessary to protect against anticipated losses and liabilities. That discretion is not unfettered and must be exercised in good faith.
The amount held should bear a reasonable relationship to the forward risk presented by the merchant. Evaluating that relationship requires consideration of trailing chargebacks and refunds, deductions already taken, potential card-brand assessments, regulatory exposure, and any other grounds offered for continuing the hold. When the reserve materially exceeds that exposure, we press for a partial release on the ground that the acquirer is oversecured.
Reserve Ledgers and Supporting Records
The information needed to evaluate forward risk and the handling of the reserve is often unavailable to the merchant. Portal access may be cut off upon termination, and continuing statements may not separately identify chargebacks, refunds, fees, assessments, reserve movements, or other deductions. The merchant may know the total amount withheld without knowing how the balance changed or what exposure remains.
Other information may be withheld for legal or proprietary reasons. Acquiring banks cannot disclose a Suspicious Activity Report or information that would reveal its existence and may be limited in what they can disclose about related regulatory inquiries. Card-brand inquiries may also be treated as confidential and proprietary, particularly when they involve monitoring algorithms, test transactions, or secret-shopping activity that contributed to the termination.
Reserve recovery often turns on obtaining a complete ledger showing every debit and credit, the current balance, and the basis for continued withholding. We compare that ledger with the governing agreements, merchant statements, settlement reports, chargeback and refund activity, and bank records. Discrepancies may support a challenge to particular deductions, a partial reserve release, or an earlier payout.
Control and Use of Reserve Funds
The entity communicating with the merchant may not hold the reserve or control its release. In a traditional acquiring relationship, an ISO may relay the acquiring bank’s decisions and may also submit deductions against the reserve. In a PayFac relationship, the PayFac may manage the merchant account while the acquiring bank retains authority over some or all of the funds.
Separate issues arise when reserve funds are used to pay fees. An acquiring bank may permit an ISO to apply the reserve to an early termination fee or another disputed charge. We examine whether the agreements authorized the deduction, whether the reserve could be used for that purpose, and which party controlled or authorized the use of the funds. Any demand should be directed to that party, not merely to the party communicating with the merchant.
When termination also results in a Mastercard MATCH entry, the reserve hold and listing may need to be addressed together.
A court-ordered asset freeze or receivership may separately govern how reserve and settlement funds must be preserved, transferred, or released.
Rome LLP handles these matters before suit and, when necessary, through arbitration or litigation. The firm also represents merchants in disputes involving foreign entities, cross-border arrangements, and agreements selecting foreign law or an out-of-state forum.
