Selling Your Customers' Credit Cards

Members of the ISP-Investor list point out that there are many issues to consider when selling your ISP, and examine closely the many implications of just one of those tricky issues.

[July 17, 2002]

On the ISP-Investor list in June, TW inquired,

"I'm in the process of selling my user base to another ISP. Are there any legal issues regarding the transfer of my users' credit card numbers? Do I need to inform my users before the transfer takes place?"

A number of respondents said there shouldn't be a problem, as long as the customer is informed:

[EL advised] "Just make the move as seamless as possible, with you and the buyer sending out both e-mails and snail mail advising the subscriber of this great move to enhance their service, thanking them for being loyal subscribers, and assuring them that you will be around to make the switch as smooth as possible, etc."

[BL agreed] "You should send them all an e-mail, and just let them know about the credit cards. The buyer should send them an e-mail as well. If you don't have everyone's e-mail address, send them something by post."

JM worried that liability issues could arise from the transfer of information:

"You do have to wonder if there's any potential liability in handing over all those credit card numbers to the new owner. What if their network is compromised and those numbers are stolen? It's one thing to safeguard them on your own network, but you obviously have no control over what happens after the changeover."

Others noted that withholding the information from the buyer is likely to have a huge effect on churn:

[BL offered] "You could withhold the last four digits, or the expiration date-but anything you do along those lines will increase the number of customers that don't convert. In the end, as the seller, you have to make the decision based on what you know of the buyer in terms of stability, ethical operation, etc."

[MT agreed] "You have to make the transition as smooth as possible, especially if the sales price is based on retention. Asking the customer to call the new ISP to give them billing info is too much of a hassle."

TB, on the other hand, recommended the safest route imaginable for the seller:

"Personally, I'd send a really nice letter of apology, explain that for the customer's security you are destroying the database with the credit card numbers, and ask that the customer contact the new owner to provide the information again. Emphasize the security angle, and the fact that you think highly enough of their past patronage not to endanger their credit card information by passing it on, and I'll bet you get 100 percent return telling you what a wonderful and thoughtful person you are. You're selling the accounts, not the billing and credit information. It's up to the new owner and the customer to work out their own payment arrangement."

AR suggested that these decisions are best left to an attorney:

"This is something that needs to be outlined in the purchase agreement between the two companies. Let the attorneys deal with it. In my experience, the billing information has been transferred to the company acquiring the users."

—End