UK Merchant Account Weirdness - Is This a Scam?

[MallOfErotica]

Hello all,

This question is for the merchant account experts and those of you who have dealt with UK-based merchant account providers.

My first foray into adult websites, malloferotica.com is based in my home country of Canada. I'm a complete novice with respect to adult-based e-commerce and suffice it to say it was next to impossible to find anyone who would set me up with a merchant account, largely because I was Canadian. I didn't have the capital to create a shelf corporation so I persevered and eventually a provider in the UK picked me up (sadly adding a bunch of content restrictions at the last minute which I think hurt my ability to attract content providers in niche fetishes...but that's another story).

Everything's been going fine for the past four months then a few days ago I get an email from them saying that some new UK laws have come into effect requiring me to create a "dormant corporation" in the UK in order to continue to use their merchant account provider business. They gave no other details except for the additional annual service charge that would be tacked onto my account as a result.

I emailed back asking for links to the law(s) in question and more details, as there was no notice given to me at all about this. Today they emailed me back, but they didn't answer any of my questions. Instead they attached a bunch of documents that seem to imply that they went ahead and incorporated my company in the UK under my name (one of them looks like an official UK legal document regarding the formation of my corporation).

Now I don't know how it all works in the UK, but in Canada (whose laws and legal system are very much based on English concepts) I had to be a Canadian citizen to incorporate and I'm quite certain I had to show ID proving I was a resident in the province in which I incorporated my business. I don't get how they could do that on my behalf without my approval or signature. The corporation is apparently under my name as the sole shareholder, but it offers no details about me other than my name. It seems suspicious to me.

Can those out there in the know confirm that is a standard practice and that I have nothing to worry about? Do I need to start looking for a new provider?

Thank you all for your advice & assistance,

NiCheng

[MallOfErotica]

UPDATE: Apparently this isn't a UK law, it's a new requirement by Visa Europe. As my merchant provider is in Europe, according to them "Visa Europe requires that our merchants are incorporated in the EU as well".

In the end they agreed to waive the incorporation fee (which was nice of them) and said that they used the original documents I provided them when getting the account set up to create the dormant incorporation.

So all's well that's ends well. Just an FYI to those who may encounter similar strange behaviour.

NiCheng

[Ketchup]

Are you selling hard goods? Why did you need a merchant account...for the billing?

Perhaps look at Verotel Flexpay you don't need merchant account for that.

also your link to gtbill on the bottom doesn't work needs to be http it says https

[MallOfErotica]

Hi Ketchup,

Thanks for pointing out the problem with the link; it has been fixed.

I'm not selling physical goods (is that what you mean by hard)? Electronic erotic content producers (i.e. folks who create videos, photosets, eBooks, etc.) create shops and upload their products. I take a cut of each sale and send them their cut once they've earned a specific threshold.

I went with a merchant account because I wanted to be able to offer competitive rates to my shopkeepers while still making some money. My current cut for each sale is 32% (before all my transaction/gateway/etc. fees), vs. 40% taken by most sites.

I will definitely look into Verotel, as their 15.5% rate for each transaction (with their Basic plan) is actually pretty darn good if that's all they take.

Thanks for the feedback!

NiCheng

[webseth]

I can vouch for verotel, I've been using them since 2002 with never a missed payment, can use my refcode in sig if you want