By Steve Schwimmer
Renaissance Merchant Services
Think you've heard about every possible deceptive practice in credit card processing agreements? I, too, thought dishonesty fueled by greed had reached its pinnacle in the payments industry, but sadly it hasn't.
And we need to collectively stop unethical practices before an outside group decides to police us.
What might this entail? It is not difficult to envision the future role of federal and state governments. Rumblings about containing us underneath a microscope lens are growing louder in capitols throughout the land.
We didn't get here overnight. Some in the industry even say we deserve government oversight; we have failed to stop the few whose deceptive practices are harming customers the majority of us are doing our best to serve.
Talk of merchant processing agreements and lack of full disclosure on the part of industry professionals has made its way into the conversations of politicians who are debating the imposition of fees on those who do not comply with honest disclosure in sales practices.
As members of this industry, we need to analyze our role in all of this and be part of the solution.
The Arkansas legislature approved Arkansas Act 911, which imposes strict disclosure requirements on merchant processing agreements and places a cap on fees that can be assessed by processors.
The bill took effect on July 31, 2007, and is an example of what is happening around the country. (For more information, see "New Arkansas law caps early termination fees," The Green Sheet, June 7, 2007, issue 07:06:01.)
Some companies in our industry mislead merchants into signing contracts that undermine the merchants' businesses and line the pockets of the processors.
Ultimately, however, the damages from this practice are greater than the profit these companies receive.
But this subject is a difficult one to broach with potential customers who often do not have enough industry knowledge to distinguish between honest and dishonest bankcard processing contracts.
As merchant level salespeople (MLSs), our primary focus is to sell our services and products. When inching toward closing a deal, it can be very difficult to step back and pause to fully discuss fees that can arise when a merchant terminates a signed contract.
My contracts contain fees as well, and I inform my customers about them. I am confident if I perform to the best of my ability and offer fair pricing, an excellent business relationship will ensue.
However, I am not naïve - there are other MLSs who can get my customer's ear and promise the world. I know this because it has happened, but the client, who was misled by a shifty competitor, eventually returned to me.
There are MLSs who do not disclose the fact that the company they represent charges cancellation fees.
Let me say that there is nothing wrong with cancellation fees; the problem lies in not disclosing to merchants the circumstances under which the fees will be imposed and not ensuring that they are reasonable.
Merchants need to know why termination fees are imposed: There are costs and expenditures involved with setting up merchant accounts - costs that need to be recouped should there be an early exit from a contract.
I know there are circumstances whereby processors are not only not disclosing fees but denying they exist, with the hopes they will never be imposed because the importance of closing the deal outweighs the risk.
Let me tell you, this risk-taking is why regulators are starting to breathe down our necks.
Contracts are designed to protect us. For example, a contract will offer protection to the processor from fraudulent activities the merchant might engage in. Contracts are a good thing; they keep everyone on the same page.
Things go wrong when the parties to a contract do not understand what they are signing. This leads me to another aspect of deception: falsifying contracts. Never, ever fill in the blank spaces of a contract to your advantage after a customer has signed it.
The sooner deception within our industry comes to an end, the better our industry will be.
Steve Schwimmer is President of the Nat-ional Association of Payment Professionals. He has been serving the payment processing industry since 1991 and is the Long Island Director of Sales for Renaissance Merchant Services. Call him at 516-746-6363 or e-mail him at thevisaguy@516phoneme.com.
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