By Timothy S. Donahue

Top Takeaways:

• Compliance expands: Payment processors and fuel retailers are warning merchants that selling unauthorized vaping products could lead to significant fines or the loss of card processing services.
• Financial pressure: The latest actions mark an expanding effort to disrupt the illicit vape market by targeting the payment infrastructure that supports unauthorized sales.
• Retail implications: Convenience stores, gas stations and other retailers face increasing compliance expectations as enforcement extends beyond manufacturers and distributors.

Payment processors and fuel retailers are intensifying efforts to curb sales of unauthorized vaping products, warning merchants that continued sales could result in substantial financial penalties or the loss of card-processing privileges.

According to a Reuters report, payments platform Fiserv, through its CardConnect subsidiary, and fuel retailers including BP, Marathon Petroleum, and Valero have issued notices to partners and store operators outlining the growing risks of selling electronic nicotine delivery system (ENDS) products that lack authorization from the U.S. Food and Drug Administration.

In a notice, BP informed branded gas station operators that “MasterCard has begun issuing… compliance violation notices to merchants throughout the industry for processing sales transactions involving illegal electronic nicotine delivery system products.” The notice also stated that selling unauthorized vape products violates retailers’ agreements with BP.

Marathon Petroleum and Valero issued similar notices, with Valero’s June 17 communication warning that payment processors could impose fines in the mid-six figures for a single violation or terminate merchants’ ability to process credit card transactions.

CardConnect also notified partners that merchants must ensure that vape sales comply with all applicable laws. The company warned that businesses failing to do so could face “corrective action” and that merchants using its payment services should not sell vaping products without FDA marketing authorization.

The notices come amid a broader campaign by a coalition of state attorneys general and local law enforcement officials from California, Illinois, Arizona, New York City, the District of Columbia, and Puerto Rico to disrupt the commercial infrastructure supporting unauthorized vape sales. The coalition has urged payment processors, e-commerce platforms, and shipping companies to take a more active role in preventing illegal transactions.

Those efforts have already contributed to changes across the industry. Shopify prohibited the sale of unauthorized vaping products on its platform, while Mastercard has warned partners that it may investigate entities that facilitate transactions involving unauthorized vape products.

Pennsylvania Attorney General Dave Sunday, one of the officials backing the initiative, said the coalition is seeking greater cooperation from financial institutions, adding, “We are asking these payment processors and credit card companies to crack down on the illegal sales of vaping devices on the internet.”

The FDA has granted marketing authorization to 45 vaping products through the premarket tobacco product application (PMTA) process. However, unauthorized disposable vape brands continue to account for a significant share of U.S. sales through convenience stores, smoke shops, and online retailers, despite ongoing enforcement efforts.