The card acquirer is withholding your settlement – what now?

First establish what has actually been done. A delayed payout, a reserve, a chargeback and a full suspension are four different situations with four different solutions. Read your own merchant agreement before you conclude anything.

Find out what is actually being withheld

Start with the message from the payment provider and check how much is being held, which transactions or periods it covers, whether new card payments can still be taken, whether the payout frequency has simply changed, whether a reserve has been established, whether it concerns specific chargebacks, which provision of the agreement the provider relies on, what documentation is required, and when the matter will be reviewed again. Ask for this in writing if the information is unclear.

A delayed settlement and a reserve are not the same thing

A payout delay normally means the business is still taking payments, but that more time passes before the settlement reaches the bank account. A reserve means the acquirer holds back all or part of the money as security against possible future exposure. Worldline, for example, describes a rolling reserve where a percentage is held for 180 days. Stripe's current EEA terms allow it, among other things, to change the payout schedule, delay or cancel payouts, establish a reserve and suspend the ability to process payments where the conditions in the agreement are met. Other acquirers use other models. So read your own merchant agreement before concluding that the hold is or is not justified.

What is a chargeback?

A chargeback concerns one specific payment that is disputed. It may be because the customer says the card was used without authorisation, the goods never arrived, the service was not delivered, the subscription had been cancelled, or the goods did not match what was agreed. Nets describes the process as the business being notified of the specific case and told what documentation is required. The business submits the documentation by the deadline, and the card issuer ultimately decides the dispute. A chargeback should not be confused with the acquirer setting up a general reserve against future risk.

Why can the acquirer hold money back?

The reason varies between providers and agreements. Typical factors are rapid growth in card turnover, unusually large transactions, a high proportion of refunds or chargebacks, sales where the customer pays long before delivery, a negative balance with the payment provider, missing ownership or customer documentation, a change in the business model, or sales falling outside the provider's risk appetite. Advance payment matters particularly. Where the business takes a card payment today for a trip or a course to be delivered months later, the payment provider can be left with substantial exposure if the company cannot deliver. That is one of the reasons reserves and longer settlement times are used.

What happens to VAT while the money is held?

For an ordinary sale, VAT is normally not deferred simply because the card acquirer has not passed the money on. Section 15-9 of the VAT Act says VAT must as a general rule be reported in the return for the period in which the sales document was issued. If the sale belongs to the July–August period, the VAT does not automatically move to a later period because the payment provider only pays out in October. That can create a real cash problem: the business has to pay VAT on a sale even though part of the card settlement is still being held. For advance payments and certain special services there are separate rules that have to be considered case by case.

Nor does the payout decide the income year

In accounting terms, income is as a general rule recognised when it is earned. For tax, the general rule is that income is allocated to the period in which the business acquired an unconditional right to it, regardless of when payment actually happens. The acquirer holding the money for days or weeks therefore does not normally move the underlying sale into a later period.

How is a withheld card settlement booked?

What matters most is that the accounts show gross sales, the acquirer's deductions and what the business is still owed. A practical reconciliation should be able to explain card turnover, less refunds and chargebacks, less fees, less any reserve, equals the amount actually paid to the bank. That should be reconciled against the acquirer's settlement reports. A withheld reserve can often represent a claim against the acquirer, but the correct balance sheet treatment depends on what the agreement actually gives the business a right to and when the amount is expected to be released. Stripe's current terms say, for example, that Stripe controls the reserve account and that the user has no legal or beneficial right to the account itself, even though Stripe has to release amounts once the risk exposure has reduced. So read the agreement before classifying a large reserve as an ordinary short-term receivable. The acquirer's fees should be booked separately from sales income. Executing a payment order is itself a financial service exempt from VAT, while particular technical services can be VAT-liable. Do not put one standard VAT code on every fee without checking the invoice.

What should the business do about liquidity?

If a large card settlement suddenly stops, draw up an updated cash flow forecast quickly. Map available bank funds, how much the acquirer is holding, expected new sales, payroll due dates, VAT and other tax due dates, suppliers that have to be paid, any refunds and chargebacks, and how long the hold can last under the agreement. If the acquirer has also stopped new payments, the business has to consider alternative payment solutions – invoicing, bank transfer or another provider. At the same time, make sure a new solution actually suits the way the business sells and the terms its customers are on.

How does a business complain?

Always start with the payment provider. A good written complaint should say which decision you dispute, what amount is being held, which provision the provider relies on, why you say the condition is not met, what documentation you have already provided, what you want the provider to do, and how quickly the matter has to be resolved given the cash position. Finansklagenemnda does not take complaints from businesses. But that does not mean every business is left with nothing but the courts.

Check who the payment provider actually is

Many payment platforms serve Norwegian businesses through a financial undertaking in another EEA country. The complaints scheme in the provider's home country may then be relevant. Stripe states, for example, that EEA customers with a complaint about regulated financial services can complain to Stripe first and then bring the matter to the Irish Financial Services and Pensions Ombudsman. The FSPO states that a limited company, sole trader or partnership can also count as a consumer in its scheme where turnover in the previous financial year did not exceed three million euro. What route is open therefore depends on which legal entity you have an agreement with, which country regulates it, which service the dispute concerns, the provider's complaint terms, and the size of the business. Check that before concluding that litigation is the only option.

This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.

Is it urgent?

We can work out what actually has to be done, what documentation exists and how quickly it can be sorted. You can also reach us in the evenings and at weekends.

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