Risk Classification Policy

1. Purpose and Scope

This Risk Classification Policy ("Policy") describes how VerifyLive, Inc. ("VerifyLive", "we", "our") classifies merchants that subscribe to the VerifyLive fraud-prevention services ("Services") into one of three risk classification tiers for purposes of subscription pricing, chargeback-guarantee eligibility, and ongoing account monitoring.

This Policy is incorporated by reference into the VerifyLive Merchant Services Agreement ("MSA"). In the event of a conflict between this Policy and the MSA, the MSA controls.

Risk Classification reflects statistical fraud exposure only. It is not a credit assessment, a judgment about a merchant's character or business practices, or a statement about the lawfulness of a merchant's products or services.

2. Classification Tiers

VerifyLive assigns each merchant account to one of three tiers upon onboarding and re-evaluates classification on a rolling basis as described in Section 5 below.

2.1 GREEN (Standard)

GREEN is the default classification for merchants that do not meet the criteria for YELLOW or RED. GREEN merchants pay the standard published subscription price for their tier (Shield Lite, Growth+, Professional, or Business) with no risk premium applied.

GREEN chargeback-guarantee caps and settlement terms are as stated in the MSA.

2.2 YELLOW (Elevated)

YELLOW classification applies to merchants whose statistical fraud exposure is elevated relative to the GREEN baseline but still within VerifyLive's acceptable underwriting range.

YELLOW merchants pay the standard subscription price plus a twelve-and-one-half percent (12.5%) risk premium. Chargeback-guarantee caps and settlement terms are otherwise as stated in the MSA.

2.3 RED (High Risk)

RED classification applies to merchants whose statistical fraud exposure materially exceeds the GREEN baseline. A RED classification does not indicate that VerifyLive has declined to serve a merchant; it reflects the additional underwriting capital required to offer chargeback-guarantee coverage to the merchant.

RED merchants pay the standard subscription price plus a twenty-five percent (25.0%) risk premium, and the chargeback-guarantee cap is adjusted as stated in the MSA.

VerifyLive reserves the right to decline to offer chargeback-guarantee coverage, or to decline to provide the Services, to any merchant whose classification VerifyLive determines, in good faith, to exceed its underwriting tolerance.

3. Classification Factors

VerifyLive determines classification based on objective, fraud-relevant factors. Classification does not consider any protected characteristic of the merchant, the merchant's principals, or the merchant's customers (see Section 8).

3.1 Factors Considered

The factors below are weighted by VerifyLive's proprietary underwriting model. No single factor is determinative.

• Product or service vertical and historical fraud rates observed in that vertical (for example, digital-only goods, high-resale-value consumer electronics, and gift cards have measurably higher fraud rates than other verticals)
• Average order value (AOV) and order-value distribution
• Historical chargeback rate, if available, and the quality of the merchant's prior fraud-prevention posture
• Issuing-bank and cardholder-geolocation risk profile observed across the merchant's transaction mix
• Device, network, and identity-signal risk observed during onboarding and the first 30 days of Services
• The merchant's policy compliance record, including adherence to the VerifyLive Acceptable Use Policy and any platform-specific operating rules (Shopify, Square, BigCommerce, WooCommerce)
• Materiality of disclosures made by the merchant during onboarding (product catalog, payment-processor history, ownership structure, corporate age)
• The extent to which a merchant overrides, ignores, or reverses VerifyLive risk recommendations in a manner that increases chargeback exposure

3.2 Factors Not Considered

VerifyLive does not classify based on the merchant's (or the merchant's principals') race, color, religion, national origin, sex, gender identity, sexual orientation, age, disability, marital status, veteran status, familial status, or any other characteristic protected under applicable law.

VerifyLive also does not classify based on the merchant's exercise of any legal right (for example, the exercise of chargeback-reversal rights by the merchant's customers through the card networks).

3.3 Vertical-Specific Default Classifications

For certain verticals where observed fraud rates materially exceed the cross-vertical baseline, VerifyLive applies a default classification at onboarding. A merchant may earn a lower-tier classification through sustained performance under the reclassification procedure in Section 5.3.

Gift card merchants, as those terms are defined in the VerifyLive Acceptable Use Policy Section 4.2, are subject to the following default classifications:

• Primary-issue gift card merchants (Merchants issuing gift cards, e-gift cards, store credit, or stored-value instruments redeemable only against Merchant’s own goods, services, or branded retail locations) are classified YELLOW by default.
• Authorized third-party retailer gift card merchants (Merchants contractually authorized to resell third-party-brand gift cards through an authorized channel) are classified RED by default. The Chargeback Guarantee cap for these merchants is set at one times (1.0x) annual Fees during the launch framework, as stated in the Merchant Services Agreement.

These default classifications reflect statistical fraud exposure observed in the applicable vertical and do not represent a judgment about any individual merchant’s business. A merchant that operates for no fewer than ninety (90) consecutive days at a chargeback rate and risk-signal profile consistent with a lower tier may be promoted under Section 5.3.

Arbitrage, peer-to-peer gift card resale marketplaces, bulk gift-card redemption schemes, and any use of gift cards in a manner consistent with money laundering or structuring are prohibited under Acceptable Use Policy Section 3.4 and are not eligible for any tier.

4. Premium Application

Risk premiums are applied to the recurring subscription fee for the merchant's tier. Premiums are computed on the base subscription fee (Shield Lite flat rate, Growth flat rate, or Professional / Business minimum-plus-GMV rate, as applicable) and are itemized on the merchant's monthly invoice.

Premiums do not compound. A YELLOW merchant that is reclassified to RED pays the 25% RED premium, not 12.5% plus 25%.

Premiums are not applied retroactively. Reclassification from a lower tier to a higher tier takes effect at the start of the next monthly billing cycle following written notice to the merchant.

5. Reclassification

5.1 Scheduled Review

VerifyLive reviews every active merchant's classification no less frequently than every ninety (90) days and more frequently where a merchant's observed fraud profile materially diverges from its classification baseline.

5.2 Downgrade (GREEN → YELLOW or YELLOW → RED)

VerifyLive may move a merchant to a higher-risk tier when the merchant's observed performance or risk profile meets one or more of the triggers in Section 3.1. VerifyLive will provide the merchant with written notice of reclassification at least thirty (30) days before the new premium takes effect, describing the factual basis for the change in plain language.

A reclassification notice is not an allegation of wrongdoing. It reflects changes in statistical risk, not assignment of fault.

5.3 Upgrade (RED → YELLOW or YELLOW → GREEN)

VerifyLive will promote a merchant to a lower-risk tier when the merchant has operated for no fewer than ninety (90) consecutive days at a chargeback rate and risk-signal profile consistent with the lower tier. Promotions take effect at the start of the next monthly billing cycle following determination.

6. Review and Appeal

A merchant that disagrees with its initial classification or a reclassification decision may request a review by submitting a written request to [email protected] within thirty (30) days of the notice. The request should describe the factual basis for the merchant's disagreement and include any documentation the merchant believes VerifyLive should consider (for example, a chargeback-response log, revised fraud-prevention controls, or corrected onboarding disclosures).

VerifyLive will respond to review requests in writing within ten (10) business days. A review response will describe the factual basis for VerifyLive's decision in plain language and identify the specific factors that VerifyLive weighted. If VerifyLive's review affirms the original classification, the merchant may request escalation to the VerifyLive Risk Review Committee by replying to the review response within five (5) business days.

The Risk Review Committee includes members drawn from VerifyLive's Legal, Risk, and Product organizations. Committee decisions are final.

7. Monthly Chargeback Circuit Breaker

Independent of Risk Classification, all merchant accounts are subject to a monthly chargeback-rate circuit breaker of 0.80%. If a merchant's approved-transaction chargeback rate in any calendar month exceeds 0.80%, VerifyLive may suspend chargeback-guarantee coverage for new transactions until the merchant and VerifyLive complete a joint root-cause review. The circuit breaker is universal, non-negotiable, and applies to all tiers including Founders tiers.

8. Non-Discrimination

VerifyLive is committed to providing Services on a non-discriminatory basis. Classification, premium pricing, chargeback-guarantee eligibility, suspension, and termination decisions are made on the basis of fraud-relevant factors only.

Any merchant that believes it has been classified or treated in a manner inconsistent with this Policy may raise the concern through the review-and-appeal process in Section 6 or by writing to [email protected].

9. Changes to This Policy

VerifyLive may update this Policy from time to time. We will publish the current version of this Policy at verifylive.net/legal/risk-classification and will note the version number and effective date on the first page. Material changes — for example, changes to tier premium percentages, the circuit-breaker threshold, or the factor list — take effect no sooner than thirty (30) days after publication, and we will notify active merchants by email or in-product notice at least thirty (30) days in advance.

A merchant that does not accept a material change may terminate the MSA for convenience before the change's effective date, subject to the termination-for-convenience provisions of the MSA.

10. Contact

General inquiries: [email protected]

Classification review requests: [email protected]

Mailing address: VerifyLive, Inc., [mailing address], Attn: Risk Review Committee

— End of Policy —