The credit card processing industry has earned a somewhat bad reputation. We have all heard stories of merchants who have been wronged by a sales agent or who has been the victim of deceptive sales tactics.
Regrettably, some companies frequently indulge in such practices: failing to fully disclose pricing, packing agreements with hidden fees, making false claims about equipment and more.
Fortunately for merchants nationwide, the FTC and Washington AG office have finally caught up with at least one of the industry offenders and charged that they deceived small businesses into buying credit card processing services and equipment.
The dishonest schemes used by the scammers are all too familiar for many merchants. The defendants allegedly called on small businesses and misrepresented that they were associated with a business’ current credit card processing company, Visa, MasterCard, or their bank and were simply ‘updating’ current service. To get the small business to agree to the update, they misrepresented that processing rates would be substantially lower with ‘wholesale’ pricing and savings of up to 30% or more. Then they would dupe customers into leasing new card processing terminals by saying that the business' current credit card processing equipment was outdated or incompatible and new, expensive leases for new equipment were necessary.
It’s not until they receive their statement and fees are being taken out of their checking account that many businesses finally realize they have been taken advantage of. Many victims discovered their new lease obligation only after being billed, still owing the balance of their previous lease, which can run into thousands of dollars. Merchants were also falsely told they can cancel any time with no penalty yet were charged substantial cancellation fees.
These business practices aren’t just unethical, they are clear violations of federal law, and these violators are about to face the consequences of such actions. While this may serve as a warning to other banks and processing companies to reign in their sales tactics; small businesses should still be extra cautious and steer clear of a bank or processor employing any of these tactics.