MCC 8220

Colleges

Applications

Decisions

Identities

Transactions

Underwriting Cheat Sheet

MCC 8220 is specifically designated for colleges, universities, professional schools, and junior colleges, encompassing institutions that provide higher education and professional training. This guide from Gratify offers an in-depth exploration of MCC 8220, providing valuable insights into its characteristics, associated risks, and best practices for managing merchant relationships within the higher education sector.

Typical Business Types

MCC 8220 assigned exclusively to colleges, universities, professional schools, and junior colleges, including both public and private institutions.

Colleges and Universities

Institutions offering undergraduate and graduate degree programs.

Online Universities

Institutions providing distance learning and online degree programs.

Continuing Education Programs

Courses for professional development and lifelong learning.

1. High Level Information for Payment Processors
2. Key Risks and Concerns
3. Common Fraud Signals
4. Underwriting Tips
5. Example Scenarios and Red Flags
6. Common Underwriting Questions
7. Ongoing Monitoring

High Level Information for Payment Processors

Transaction Types

Large One-Time Payments
- Tuition fees paid upfront for semesters or academic years.
Recurring Payments
- Installment plans for tuition, housing, or meal plans.
Application and Registration Fees
- Smaller, often non-refundable payments during the admission process.
Refunds and Adjustments
- Credits issued due to course changes, withdrawals, or overpayments.
International Transactions
- Payments from international students in various currencies.
Donations and Endowments
- Contributions made by alumni or benefactors, sometimes in large amounts.

Common Payment Methods

Credit and Debit Cards
- Used for tuition, fees, and other payments both in-person and online.
ACH Transfers
- Direct bank debits for larger sums or recurring payments.
Checks
- Traditional method, especially for significant payments.
Online Payment Platforms
- Payments processed through the institution's website or third-party services.
Wire Transfers
- Common for international payments.
Financial Aid Disbursements
- Application of scholarships, grants, or loans to student accounts.

Unique Business Characteristics

High Transaction Amounts
- Significant sums due to tuition and associated fees.
Seasonal Revenue Fluctuations
- Peak activity during enrollment periods and semester starts.
Regulatory Compliance
- Adherence to educational laws, accreditation standards, and financial regulations.
Sensitive Personal Data
- Handling of extensive personal and financial information requiring strict security.
Third-Party Payments
- Involvement of parents, guardians, or sponsors in making payments.

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Key Risks and Concerns

Fraud Risks

Identity Theft
- Enrollment using stolen personal information.
Payment Fraud
- Use of stolen credit cards or bank information for payments.
Chargeback Fraud
- Students disputing charges after attending classes or using services.
Financial Aid Fraud
- Misuse of government funds, scholarships, or loans.
Account Takeover
- Unauthorized access to student or donor accounts.
Phishing Attacks
- Attempts to steal login credentials or financial information.

Regulatory Challenges

PCI DSS Compliance
- Ensuring secure handling of payment card data.
FERPA Compliance
- Protecting student educational records under the Family Educational Rights and Privacy Act.
Data Protection Laws
- Adherence to GDPR, CCPA, and other privacy regulations.
Accreditation Standards
- Maintaining recognized educational standards and certifications.
Consumer Protection Laws
- Transparent disclosure of fees, refund policies, and program details.
Tax Compliance
- Proper handling of donations, endowments, and tax-exempt status.

Chargeback Triggers

Service Not Provided
- Claims that educational services were not delivered as promised.
Misrepresentation
- Disputes over the quality or content of courses.
Billing Errors
- Incorrect charges or unauthorized fees.
Unauthorized Transactions
- Charges not recognized by the payer.
Refund Policy Disputes
- Conflicts over eligibility for refunds upon withdrawal or course changes.

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Common Fraud Signals

Multiple Payments with Different Cards

Tuition or fees paid using several cards under different names.

Mismatch in Payer Information

Discrepancies between student details and payment information.

High-Risk Countries

Payments from countries known for higher fraud rates.

Unusual Enrollment Patterns

Sudden influx of enrollments from the same IP address or location.

Rapid Chargebacks

Chargebacks filed shortly after payment, especially before the start of classes.

Large Donations from Unknown Sources

Significant contributions without prior relationship to the institution.

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Underwriting Tips

Business Verification

Confirm accreditation and valid educational licenses.
Verify physical campus locations and online presence.
Check compliance with educational regulations and standards.
Review the institution's history and reputation.

Financial Assessment

Review financial statements to evaluate revenue stability and financial health.
Analyze average transaction amounts and processing volumes.
Assess the impact of enrollment cycles on cash flow.

Risk Evaluation

Examine historical chargeback ratios and reasons.
Assess fraud prevention measures and security protocols.
Review policies for refunds, cancellations, and withdrawals.

Policy Review

Ensure clear terms and conditions for courses, fees, and services.
Verify that refund and cancellation policies are transparent and accessible.
Evaluate data protection and privacy policies for compliance.

Technology Assessment

Confirm the use of secure, up-to-date payment processing systems.
Ensure encryption and tokenization are implemented for data protection.
Verify compliance with PCI DSS and other security standards.

Reputation Analysis

Check online reviews, rankings, and accreditation status.
Investigate any history of regulatory violations or legal issues.
Assess student satisfaction levels and complaint resolution effectiveness.

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Example Scenarios and Red Flags

Example Scenarios and Red Flags

Spike in International Enrollments with Unverified Credentials
- A university experiences a sudden increase in foreign students with questionable documentation, indicating potential fraud.
High Chargeback Volume After Semester Start
- Students dispute tuition charges after attending classes, suggesting chargeback fraud.
Multiple Payments from Unrelated Third Parties
- Tuition fees paid by individuals not associated with the student, raising money laundering concerns.
Large Anonymous Donations
- Significant contributions from unknown donors, potentially indicating illicit funds.
Inconsistent Communication
- Difficulty contacting students or donors who have made significant payments, possibly signaling fraudulent activity.

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Common Underwriting Questions

Institution Details

What types of programs and degrees do you offer?
Are your programs accredited, and by which organizations?
Do you operate physical campuses, online platforms, or both?

Payment Processing Methods

What payment options are available to students and donors?
Do you offer installment plans or require full payment upfront?
How do you handle international payments and currency conversions?

Fraud Prevention Measures

What procedures are in place to verify student and payer identities?
Do you utilize any fraud detection tools or services?
How do you secure personal and payment data?

Regulatory Compliance

Are you compliant with PCI DSS and data protection regulations?
How do you ensure adherence to educational laws and accreditation standards?
What measures are in place to comply with FERPA and other privacy laws?

Refund and Cancellation Policies

What is your policy on refunds for withdrawn or canceled courses?
How are these policies communicated to students and payers?
Do you have clear terms regarding deposits and non-refundable fees?

Customer Service and Support

What channels are available for student and payer support?
What is your average response time for resolving issues?
How do you handle complaints regarding billing or services?

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Ongoing Monitoring

Transaction Monitoring

Implement real-time alerts for suspicious activities.
Regularly review transaction reports for anomalies or patterns indicative of fraud.
Monitor for multiple payments from the same source or rapid chargebacks.

Compliance Checks

Ensure continuous adherence to PCI DSS, FERPA, and other regulatory requirements.
Stay updated on changes in educational laws and implement necessary adjustments.
Conduct regular audits of payment systems and data security measures.

Security Updates

Keep systems and software up to date with security patches.
Implement advanced security features like encryption, tokenization, and multi-factor authentication.
Train staff on the latest cybersecurity practices and data protection policies.

Merchant Communication

Maintain open dialogue regarding changes in operations or program offerings.
Provide resources and support for fraud prevention and compliance.
Encourage reporting of any suspicious activities or security concerns.

Risk Assessment Adjustments

Reevaluate risk parameters based on changes in transaction volumes or patterns.
Update underwriting policies as necessary to reflect current risks.
Monitor enrollment periods and donation drives for potential spikes in activity.

Customer Feedback Analysis

Monitor reviews and feedback on educational platforms and social media.
Address negative feedback promptly to improve satisfaction.
Use feedback to identify potential areas of risk or concern.

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