A Way Out
Tactics for Exiting Your Contract for Free
Cancelling a merchant account contract without paying an Early Termination Fee (ETF) can be one of the most difficult problems a small business owner can face. In fact, most business owners who encounter this issue are often caught by complete surprise because the cancellation fee was never revealed during the account setup process (aside from a single sentence buried in the fine print of a 10+ page service agreement). The first thing to understand is that there isn’t a guaranteed method for getting out of a merchant account contract without paying a cancellation fee; however, there are tactics that can increase your chances of successfully exiting one of these contracts while keeping the providers out of your checking account.
Prevention & Action
This two-part article will cover the most important areas of merchant account cancellation, starting with how to prevent getting into this situation in the first place. Part 2 will discuss how to prepare for an account cancellation before notifying the processor, methods to both stop the ETF from being taken from your account, and recovering an ETF after its already been taken. Most of these tactics are gathered from either personal experience as a former sales agent of the merchant credit card processing industry, or from relayed actual merchant experience.
Part 1 – Prevention
How You Got Trapped
We can’t cover merchant account cancellation without briefly explaining how merchants get themselves into this frustrating situation. In the majority of cases, the problem stems from four mistakes: Failing to research a provider, trusting an agent’s word, not reading the fine print prior to signing the agreement, and not getting promises in writing.
#1. Failing to Do Your Research
If you are a new business owner, get ready to also become a professional researcher. There are a vast number of business-to-business product and service companies that want to sell you something. Unfortunately, there are also some very bad seeds in this apple. If you do not carefully research each company you are considering entering into business with, you run a very good chance of losing a lot of money. Merchant account providers are no exception to this rule and most seasoned business owners will tell you that the bad ones take a very big bite. Always, always search for the best providers for your business before entering into any agreements.
#2. Trusting a Sales Agent’s Word
Generally speaking, good companies have good sales agents and vice versa, but never take a sales agent at his word. Nearly all merchant account agreements explicitly state that the processor is not required to honor anything the sales agent says or promises. This is usually because the agent is not an actual employee of the company but, instead, an authorized reseller who operates independently and is paid solely on commission. Whether it’s poor training, ignorance, or malicious intent, agents constantly fail to verbally disclose important contract terms and fees. In fact, some will knowingly lie just to get a merchant to sign an agreement quickly. Even if the agent is a family member or close friend, you are playing with fire if you make your decision on the basis of a conversation alone.
#3. Failing to Read the Fine Print
Always read a merchant account contract before signing. It sounds like common sense, but a large percentage of unhappy merchants find themselves in a bad situation because they disregarded this cardinal rule. When you take the time to read the fine print, you will most likely encounter terms and conditions that were not disclosed or that cause confusion. Keep notes as you read and get clarification if you have questions. Keep in mind that many merchant account agreements are up to 60 pages long even though the signature portion may only be on the first or second page of the application. Bad agents will sometimes “forget” to hand over the pages with the fine print. Be sure you have the whole document before signing.
#4. Failing to Get Promises in Writing
Lastly, if an agent or a representative of the company makes a promise to you that contradicts a condition of the contract, get it in writing! If the agent is independent, get it in writing from both the agent and the company. Make sure the agent’s written promise states that they will personally be held responsible. Remember, independent agents can’t assign obligations on behalf of the processor because they do not actually work for the processor. You need to be able to go after the agent personally if they do not deliver. Such promises may be for things like waiving a service agreement length and ETF or paying an ETF of another processor if you sign with them. It may also be for reimbursement of equipment or waiving of other fees such as the despised PCI Compliance Fee. If you have it in writing, you now have recourse against both the agent and the company should they not deliver on their end of the bargain.
Need to Get Out Now?
On to Part 2!
On to Part 2!
Now that we have covered methods for avoiding a bad merchant account contract, check out Part Two of this article, “Cancelling a Merchant Account Without Paying a Fee.”