US Merchant Account Requirements: SSN’s & TIN’s

Opening a high or low risk merchant services account requires that businesses submit an application with key identifying information such as your business name, owner name, SSN (Social Security number) or TIN (Taxpayer Identification Number). Credi bureaus request this information in order to successfully and accurately check your credit score, which is a key indicator of trustworthiness and affects the terms of your merchant account. If you have bad credit, don’t worry, there are mechanisms to allow you to accept credit cards, but these require some compromise on the part of the merchant. Banks also utilize this information to comply with know your customer laws, which mandate that businesses can verify who they are doing business with.

What Is a Taxpayer Identification Number or TIN?

All US banks require identifying information to be able to open a business account, apply for a credit card or open a personal savings or checking account. For most people this can be your Social Security Number, but what if you are a foreigner who wants to start a business in the USA? That’s where the TIN comes in. The US Internal Revenue Service (IRS) will provide a Taxpayer Identification Number to foreign nationals who don’t have a social security number (SSN) to start a business as a sole proprietor, a partnership, an LLC or Corporation. The TIN works in much the same way as an SSN, but those who have a TIN do not receive Medicare and Social Security at retirement. One of the benefits of the TIN is that if you plan on becoming a US citizen in the future and receive an SSN, you can transfer all your credit history from your TIN to your SSN.

What Is a Social Security Number or SSN?

A Social Security Number (SSN) is an account number that all natural-born US citizens receive automatically when they are born. While its primary purpose is to track US citizens payments into retirement and healthcare plans run by the federal government, the SSN also serves as the primary identification tool for people applying for a job, applying for a credit card, getting a loan from the bank, or if they are applying for a merchant account.

Why Do you need a Taxpayer Identification Number (TIN) or Social Security Number (SSN) when Doing Business?

These requirements can be largely traced back to Section 326 of the Patriot Act, which required that all financial institutions establish a Customer Identification Program (CIP), to verify the identity of any person who wants to carry out financial transactions in their businesses. These regulations govern banks, investment brokerages, merchant service providers, loan offices and trust companies.

The main purpose of these regulations is NOT to make it hard to conduct business, but rather to keep the lines of communication open and make it easier for the US government and allied nations to prevent identity theft, money laundering, terrorism financing and activities, narcotics trade and other types of social and financial malfeasance. The TIN and SSN requirements are a key part of the procedures that Financial institutions put in place to verify a customer’s identity and ensure that the customer does not appear on any government list of terrorists and to report suspicious behavior.

Are SSNs and TINs the Only Way to Fulfill the Regulations?

The laws don’t dictate that the financial institutions use SSN or TIN to fulfill this obligation. The reason that financial institutions use them is that they are so ubiquitous and these institutions find them to be reliable and effective way to comply with regulations and discourage criminal behavior. The other benefit of using them is that it makes it much easier to run a credit report.

SSN or TIN and Your Credit Score

The SSN or TIN also helps to track a credit history. By using an SSN or TIN to get a credit score, business owners face a difficult time attempting to escape from a non-payment of debt record.

Furthermore, as we have outlined in several of our articles regarding personal credit, the SSN or TIN is also used to help the processing bank determine the credit worthiness of the potential merchant. The personal credit history demonstrates a signers ability to repay debts, and as we have discussed in several articles, a merchant account carries the risk of causing the processing bank a significant loss.

Lastly, since a US merchant account typically requires a personal guaranty (except for publicly traded corporations or charities) to provide some protection for the processing bank against a loss, if the personal guarantor is not a US citizen, a US processing bank would have little legal recourse in attempting to recover a loss caused by a foreign citizen.

In summary, all US processing banks require a SSN in order to approve any merchant account; to confirm the identity of the signer, to determine the credit worthiness of the signer, and to provide an effective personal guaranty.

While this does make it difficult for individuals who are not US citizens to apply for US merchant accounts, international merchant accounts are subject to a different set of regulations, and thus remain an option for individuals without a SSN or TIN. One exception to this requirement, is that Canadian merchants can apply using their SIN, instead of a SSN, with a few select US based processing banks that Durango Merchant Services works with.

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