Don't be caught in a bad merchant services (payment processing) contract. 

A friend of mine asked me to run their payment processing (credit card processing)  application and see if they were getting a fair rate  on their transactions. Little did this retailer know they were being overcharged far more than the rate they thought they were supposed to be paying, but also they were about to embark down the road of trying to get out of a merchant service agreement contract they didn't even know about & a merchant account cancelation fee far beyond a reasonable amount. 

It started out with this business owner wanting to simply compare payment processing rates.  It seemed every month their gross receipts compared to the amount they actually received from their payment processing company was a fraction of the amount they took in. After sending in his two most recent statements to be analyzed by a specialist we found that he was paying a much higher rate than he expected when he signed up with this company. 

OK, so this is a simple fix right? Shop for a better deal & worse case scenario you buy a new card reader. It’s a small local business with fairly good volume of sales. This should be a simple process to give him a quote, he looks at a few other options, compares the rates, & gets on with his life. Not so simple, turns out he was one year into a five year contract. He was looking down the barrel at four more years of this high rate. He fell into one of the common troubles with payment processing, a contract. He wasn’t even aware of the contract with the payment processing company. The sales rep never mentioned it, and he did not read all of the fine print. 

In order to buy out of the contract the most common buyout fees are: Either $500 for the cancellation or 0.3 percent of average sales volume multiplied by the number of remaining months in the contract. 

In his case he would be charged whichever is greater of these fees. They wanted to charge him 0.03 percent of his average sales volume multiplied by 48 months! 

*Find out what the maximum allowed cancelation fee is in your specific state. You may be fortunate enough for the max allowed being the lesser amount. 

These companies pray on business owners who are too busy to read the fine print & shop prices. To get him out of his contract it would cost a big price in penalties, making it not worth the change to get a better deal. We looked at a lot of options. Turns out he wasn’t the only one with this problem. 

He wasn’t completely stuck though. I have outlined below a common technique for dealing with these companies. In his case he asked the company what was the minimum sales volume he needed to run through the company & decided he satisfy that requirement for the remainder of his term. 

Common Business Practices To Address A High Merchant Services Account Cancelation Fee:

Document

Take notes of who you speak with & when. It will be helpful to have the exact report of what you are told so be sure to include the results of your call in your notes. You need to show what is referred to as “Good Faith” in order to take the matter further if needed. Hopefully it doesn’t come down to that but you do wan to be prepared. I like to make notes on my statement so I can circle items and jot down their explanations of the facts. I keep these statements in a file with any other documentation they mail me, a copy of the initial contract/service agreement, and the notes I took when procuring the service to begin with. 

Negotiate

Once you have your documentation all together. Carefully look through the contract making note of all your questions. Take a look at your most recent statements and highlight all the fees. Payment processing companies justify their fees when they see little profit in an account, and/or high risk. Take this information to the highest authority in the payment processing company you can reach. Point out all of the proceeds they have seen from you during your contract & any relevant information. Chances are they will generic responses, but stay calm and steadfast in your approach. Cancelation fees are supposed to be a way for a company to hedge against risk & low producing revenue on accounts. If you have already given them substantial revenue they could be willing to waive or reduce cancelation fees. Let them know you plan on following through with this dispute with reviews & complaints to the below listed organizations. Do this in a polite way though, you do not want to back yourself in a corner. The idea is to get them to want to help you.  

Stay On It

Just like a buzzing fly gets annoying so can you without loosing your cool. Consistently make contacts to organizations which will contact the company. Write the company follow up letters and tell them what you want to resolve the issue. Make it easy for them to resolve the issue by laying out what you are asking for them to do.

Reviews

If you cannot get assistance of your credit card processing company than take the web. Often times companies will monitor reviews and respond to negative ones in order to boost public option. Just like when you speak with the company reps, be sure to communicate clearly without emotion. Just state clear facts and be specific. Try to avoid labeling the company with derogatory phrases. 

Better Business Bureau

The Better Business Bureau (BBB) will actually follow up on your behalf! They don’t have the power to make the company act, but they will relay your complaint & try to get a resolution. The BBB rates companies and a good rating is a highly valued thing for companies. Make sure you follow up with your claim to the BBB and communicate with them if it is not resolved to your satisfaction, even after their first attempt at resolving the issue it can make a difference to communicate your feedback.

http://www.bbb.org/

The Federal Trade Commission

There are many organizations which need to be notified when a merchant is being unfair. You can help yourself & others avoid these praying processing companies. The Federal Trade Commission (FTC) is one of the organizations you should be sure to notify:

https://www.ftccomplaintassistant.gov/

1 (877) FTC-HELP

Also a good reference. Check out this article from the Federal Trade Commission website: 

Play your cards right: 7 tips if your small business accepts credit cards

Go To The Bank

The merchant service company runs their transactions through a bank (Acquiring Bank) also known as a sponsoring bank, they are the ones who underwrite the transactions. Just like insurance gets expensive with too many claims, the underwriting bank can also raise the rates for too many complaints/claims. It is worth reaching out and making your grievance known. Make sure to follow up in writing and ask how & when you can expect a response. You can find out what bank to contact by looking up the merchant service/payment processor’s website & taking a look at the bottom where is says what Bank they are registered with. 

State Attorney General

Search online for your state’s Attorney General contact information. This step needs to be taken if you find something illegal has happened. Just being in a bad deal will not get you far here. Be ready with your evidence and facts of the case. You want to be well organized and have your homework done up front. You don’t need to have a legal background to take this route. You just need well documented information presented to the Attorney General.

This isn’t legal advice, I’m not a lawyer. I’m only a person who wants to see honest hardworking people get the best deal possible & share this cautionary tale in hopes it will not happen again. 

Thanks for reading! To find out more of what you should be looking for out of your merchant services check out this article:  Why people are paying too much for payment (credit card) processing.