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April 22, 2019 • Issue 19:04:02

Understanding the fine print

stop flowing in. It's hard to sue for a perceived contract
breach if your $20,000 a month residual stream is cut off,
Monroe said.

The best way to avoid this is to hire an experienced attorney
to review contracts and help negotiate a better deal. It's far
more cost-effective than hiring attorneys to file lawsuits.
Hiring an attorney after the fact "can cost at least 10 times
as much as getting one to look at the contract" before it's
signed, Monroe said. Targen concurred, adding, it's "a good
upfront investment" to have a contact reviewed in advance.

James Shepherd, founder and president of CC Sales Pro,
suggested MLSs and ISOs can improve their negotiating
positions by agreeing to compensation based on
performance benchmarks, at least in the beginning. "When
By Patti Murphy negotiating a contract, in order to get what you want, don't
be afraid of performance-based ramp-ups," he said. "Just be
erchant level salespeople (MLSs) who build realistic."
profitable merchant portfolios know how to
understand merchant pain points and sell For example, Shepherd added, a contract might call for a
M solutions that address them. Most, however, 50 percent split of residuals until the agent reaches a set
are not attorneys. That can cause problems, as their for- number of signed merchants per month, at which time
tunes typically are tied to the particulars of contracts they they qualify for a 55 percent residual split. The split would
sign with upstream partners. And those contracts are any- continue to increase at predetermined intervals of monthly
thing but simple. new accounts added. But even these arrangements can
contain gotchas. "One thing to look for is whether the split
"The opaque nature of the acquiring business lends can get reduced if you stop selling that many new accounts,"
itself to companies taking advantage of people without Shepherd warned.
[adequate] information, such as sales agents and small
ISOs," said Theodore Monroe, a Los Angeles-based
attorney specializing in payments law. "A lot of ISOs and
agents trust their processors." But for those [processors] Contributed articles inside by:
it's a business, and they can and do take advantage of
downstream partners, he added. Dee and Emily Karawadra .................................................................32
O.B. Rawls ................................................................................................36
"The little guys don't know what they don't know, and they Josh Herndon.........................................................................................38
can be easily duped," noted Holli Targen, a partner in the
Southfield, Mich., offices of Jaffe Raitt Heuer & Weiss, and Jeff Fortney .............................................................................................40
chairperson of the firm's electronic payments law group.
TOC on page 3
Typically, those getting the short end of a contract don't
realize it until something drastic happens, like residuals
Continued on page 30