Most CBD merchants know they have to follow FDA guidelines for nutraceuticals when marketing CBD products. But did you know you also must abide by those guidelines if you want a bank to give you a CBD merchant account to accept payments for CBD?
Banks are also bound by regulations set for the industry. Processors already consider CBD a risk, and as such, they have very strict underwriting guidelines for CBD merchant accounts. Many of the things that most businesses do to market their products are off limits to CBD merchants.
Consumers have questions about what CBD products are good for. They need to be educated to make sure they're making informed decisions. It's difficult to market your products without being able to talk about the benefits you wholeheartedly believe in. But nonetheless, this is what you've been tasked with.
Merchants must find a way to market their products effectively, while staying within the limitations of bank and FDA guidelines. And, at the end of the day, you can't get your healing products out to the people who need them if you don't have a way to accept payments for CBD!
Processors look to the FDA to create CBD underwriting guidelines.
The Federal Drug Administration (FDA), Federal Trade Commission (FTC), and National Advertising Division (NAD) all work to protect the public. They make sure what we sell isn't harmful, that we use truth in advertising, and regulate deceptive practices in the marketplace.
The FDA regulates food, drugs, and dietary supplements. They regulate any product that is intended to change or affect the structure and/or function of the body. Everything we sell must meet the claims guidelines set by these governmental entities.
That means they are watching over everything we say or claim about the products we sell. But the regulatory framework for CBD products is still being built. This brings a higher level of scrutiny to the market. And that intense scrutiny has led to numerous merchants getting caught for their product claims.
Processing banks fashion their underwriting guidelines based on their interpretation of the FDA guidelines. Warning letters from the FTC continue to go out to CBD merchants for claims they make on their websites and in advertising. This isn’t good because banks will not process payments for companies who won't abide by these guidelines.
For a CBD merchant account, follow health claim best practices.
When you apply for a merchant account to accept credit cards for CBD, you'll be scrutinized by the bank too. The bank will have underwriting guidelines they have created based on their interpretation of the FDA guidelines.
The processor will thoroughly vet your eCommerce site. Even to the point of picking a product and going through the purchase process. They will expect your website to be completely operational. They will not approve any website that is “still being built” or missing any webpages or forms.
Along with your application, you’ll be expected to provide proper documentation proving your CBD products contain less than 0.3% THC. They will ask for a Certificate of Analysis (COA) for each product you market.
CBD merchants must avoid certain language and medical claims. The bank will scrutinize both your marketing and product descriptions. Banks must monitor your marketing to make sure it aligns with the law AND their underwriting guidelines. They’ll want to see that your claims meet their guidelines.
Even if your lawyer reviews your product descriptions and feels they’re within FDA guidelines, it won't matter. You can submit a legal opinion letter along with the application, but the bank will only be concerned with their own guidelines.
As long as you're following best practices for CBD health claims, getting a CBD merchant account shouldn't be a problem.
Best practices for CBD health claims.
These are the things your processor or merchant account provider will be looking for. How you describe your product and its uses cannot state, claim, or even hint at your product's medicinal value. They will look for terms that fit the guideline of influencing the “structure or function of the human body”.
Keep product descriptions about the product’s physical properties. This would include things like the product’s appearance, texture, and absorption. You don't want to write about any benefits or effects that may come from using the product in your descriptions.
Claims about the benefits or affect of CBD.
Making statements or claims about the effects of an ingredient or product is tricky. You can't talk about how it affects the body. And you can't talk about how it affects a disease.
They do not allow you to allude to the thought that CBD can affect either the structure or function of the body. That means you can't say CBD helps with inflammation. Diseases claims are any language considered to explicitly state or infer that a product can prevent or treat an illness.
When it comes to claims regarding specific diseases or ailments, just don't do it. Underwriters will check to see if your website lists diseases and ailments. This could lead consumers to believe that your product helps with those diseases. It can even tempt them into assuming your product is FDA approved because they’re listed on your site.
Using words like potentially and possibly won't fool underwriters. Saying that a product can “potentially” reduce inflammation is still considered a claim.
Customer product reviews and testimonials can hurt you.
They may help you sell your products, but they can be the thing that gets your CBD merchant account application rejected. It's great to have product reviews. But if customers write reviews that make health claims, it's best to omit those reviews from your site.
It's tempting to try to find ways to skirt claims restrictions, but it really isn't a good idea.
Sometimes marketers will include funny product names or images that consumers might recognize as a product benefit. They may play on a commonly known pun or accepted belief.
The FDA and FTC are quite adept at recognizing an implied medicinal use. As far as the FTC is concerned, an implied claim is just as wrong as a stated claim. Which means the underwriting team is also going to be looking out for these types of sneaky comments and images.
Even using the term “natural” or “all natural” is risky.
On the one hand, there technically is no legal definition for the word natural. So if you want to use this term, you are not exactly out of compliance. However, you do need to understand each and every ingredient in your product if you're going to call it natural. If there's even one tiny bit of something that is not natural you can't take that chance. Especially since the FDA and the FTC’s focus is catching deceiving claims from businesses.
Help processors help you and you’ll enjoy a reliable CBD merchant account.
Banks must weigh the financial risk, legal liability, and the risk of brand damage for each business sector they serve. CBD remains a high-risk industry for financial institutions. The nutraceutical industry is fraught with fraud and chargebacks, and the CBD sector is no different.
Not only that, but the FDA is currently developing a regulatory framework for the CBD industry. Most banks don't want to get involved with business models that have too much operational grey area.
Continually changing regulations make it harder for banks to manage liability. Processors don't have time to make sure every business is complying with federal and state regulations. Especially when those regulations are continuing to be written. So not only is CBD a high-risk industry to serve, but it requires extra oversight of continually morphing regulation.
If you can follow these best practices for CBD health claims, you help make CBD credit card processing possible. You help yourself by staying clear of the FDA and FTC. And you’ll help make it easier for your processing bank to continue to provide you with payment processing services.
At Bankcard International Group, we focus on your business’s success. We have over 20 years of experience in high-risk credit card processing. We’ve also served the cannabis industry since the beginning. We understand the challenges of providing payment processing to the industry as a whole. And we don’t shy away from finding legitimate, dependable, and affordable solutions just because it's tricky.
If you need a CBD merchant account, or advice on CBD advertising, call us today. One of our ETA Certified Payments Professionals will be happy to discuss your situation and advise you on the best solutions for your success.