Shady Merchant Service Account

[ddeder]

What is the name of your state? MINNESOTA

I own a small business that accepts credit cards.

I had been using Company A for my merchant account for four years when a sales rep for Company B entered my store one day and told me that I could save money by switching to Company B. He convinced me that this was true so I switched to Company B.

Within a few months I noticed that I was not saving money with Company B. In fact, I was being charged more money with Company B.

Two things in particular were costing me more money. First, they have been charging me $4.95 a month for something called Equipment Replacement Service. Apparently this is some sort of insurance policy for my equipment. I did not purchase my equipment through this company and I never would have agreed to this charge had I known about it. It is buried in the contract but it was never mentioned by the sales rep. Second, there is a monthly minimum fee of $25 which is on the contract but was not mentioned by the sales rep. In effect, if I do not process a credit card all month, I still get charged a $25 minimum monthly fee.

Also in the contract, but not mentioned to me by the sales rep, is that there is a termination fee of $295 should I choose to close my account for any reason. Apparently this fee applies no matter how long I have the account. So apparently, once they have you signed up, they know they will one day get $295 from you no matter what.

As it is obvious that I am paying more per month in fees for this merchant account than I was paying with my previous merchant account, I was lied to by the sales rep. Now this wouldn’t be such a big deal if it were not for the $295 termination fee they will charge me when I cancel.

It is obvious that the sales rep only pointed out items of the contract that supported his claims while not mentioning other items in the contract that clearly would have been deal breakers. Does anyone have any suggestions on how I should handle this (other than just bend over)?

Thanks.

 

[seniorjudge]

What is the name of your state? MINNESOTA

I own a small business that accepts credit cards.

I had been using Company A for my merchant account for four years when a sales rep for Company B entered my store one day and told me that I could save money by switching to Company B. He convinced me that this was true so I switched to Company B.

Within a few months I noticed that I was not saving money with Company B. In fact, I was being charged more money with Company B.

Two things in particular were costing me more money. First, they have been charging me $4.95 a month for something called Equipment Replacement Service. Apparently this is some sort of insurance policy for my equipment. I did not purchase my equipment through this company and I never would have agreed to this charge had I known about it. It is buried in the contract but it was never mentioned by the sales rep. Second, there is a monthly minimum fee of $25 which is on the contract but was not mentioned by the sales rep. In effect, if I do not process a credit card all month, I still get charged a $25 minimum monthly fee.

Also in the contract, but not mentioned to me by the sales rep, is that there is a termination fee of $295 should I choose to close my account for any reason. Apparently this fee applies no matter how long I have the account. So apparently, once they have you signed up, they know they will one day get $295 from you no matter what.

As it is obvious that I am paying more per month in fees for this merchant account than I was paying with my previous merchant account, I was lied to by the sales rep. Now this wouldn’t be such a big deal if it were not for the $295 termination fee they will charge me when I cancel.

It is obvious that the sales rep only pointed out items of the contract that supported his claims while not mentioning other items in the contract that clearly would have been deal breakers. Does anyone have any suggestions on how I should handle this (other than just bend over)?

Thanks.

It is obvious that the sales rep only pointed out items of the contract that supported his claims while not mentioning other items in the contract that clearly would have been deal breakers.

Are you able to read, write, and understand the English language?

 

[ddeder]

Yes I can. I guess this wouldn't be a problem if the rep hadn't lied about saving me money. Since he did, I think the contract should be rendered void.

 

[ddeder]

Another thing...

I suppose Innovative Merchant could have made it a $20,000 termination fee and I would still be on the hook since I didn't see it in the fine print. So if the sales rep does not mention it and the fine print is missed, they can get whatever they want...

 

[divgradcurl]

Yes I can. I guess this wouldn't be a problem if the rep hadn't lied about saving me money. Since he did, I think the contract should be rendered void.

How are you going to prove what the sales rep said to you?

Look, you had a duty to read the entire contract before you signed. Is it unethical for a salesperson to gloss over the "bad" parts of the contract? Probably. Is it illegal? No. You are supposed to read your contracts in full before you sign.

A court is going to assume you read the contract, and agreed to its contents, before signing it. Further, you are a merchant, so you are going to be held to even a higher standard (in most cases) than a consumer would for reading and understanding your contract.

You don't really have much to go on here. Suck it up, pay the termination fee, and read your contracts before signing them next time.

 

[divgradcurl]

I suppose Innovative Merchant could have made it a $20,000 termination fee and I would still be on the hook since I didn't see it in the fine print. So if the sales rep does not mention it and the fine print is missed, they can get whatever they want...

This probably wouldn't fly. The termination fee is essentially a "liquidated damages" clause for breach of contract. Contract law requires that the amount of liquidated damages be "reasonable" -- this amount would clearly be unreasonable under your facts. If this ever went to court, you could probably get the $20,000 reduced to some "reasonable" amount.

 

[ddeder]

So is it reasonable to have a termination fee that never expires? Basically, this means that the moment I sign the contract this company knows that someday I will have to pay them $295 to terminate it - no matter what. They can gouge me on their fees and whatnot with no worries because that $295 is already in the bag. I have filed a complaint with the Better Business Bureau and I see that others have files similar complaints against this company over the past couple of years.

 

[divgradcurl]

So is it reasonable to have a termination fee that never expires? Basically, this means that the moment I sign the contract this company knows that someday I will have to pay them $295 to terminate it - no matter what. They can gouge me on their fees and whatnot with no worries because that $295 is already in the bag. I have filed a complaint with the Better Business Bureau and I see that others have files similar complaints against this company over the past couple of years.

I don't know if it's reasonable or not -- that's for a court to decide. I suppose that such a fee, when there is no expiration date, might be found unreasonable -- but on the other hand, the court might also simply find that you had the contract, you presumabely read it before you signed it, and you presumabely agreed to the contents of the contract. I don't know what a court might say. Go ahead and quit, don't pay the fee, let them take you to small claims, and see what happens. You might end up taking a credit ding, though. Probably your best bet is to just eat the fee, and be more careful in the future.