March 2018 Complaint Roundup: Is BB&T Marking Up Interchange?

What Are Other Merchants Saying?

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© Depositphotos – James Steidl
Here at CPO, we review every comment that we receive from our readers, and sometimes we see merchants mention a topic that isn't covered in our reviews. To help you stay on top of the trends and issues in the credit card processing industry, we've gathered the following merchant complaints posted to CPO during February and March. If you would like to respond or add your thoughts to any of these comments, please follow the links to the original comments and reply to them directly, or leave a comment of your own below the appropriate company's review.

A BB&T Merchant's Allegation

Michhael Ilsemann's March 1 comment on our BB&T Merchant Services review states the following:

I have recently discovered that BB & T is padding certain interchange rates by .50 This is a shady business practice at best. I contacted my merchant services manager and told him what I had discovered. He has not gotten back with me. I had a meeting with my BB & T bank manager yesterday explaining what was going on. She said she would investigate and follow up with me. She assured me that the bank would do what was right and ethical. We will see if she is correct. Such deceptive business practices represent the complete opposite of what is written in the BB&T culture book. I hope that Kelly King (BB & T CEO) reads this and takes action so that these practices will no longer hurt customers that place they trust (and money) in his organization.

This claim is out of character for the merchant feedback that BB&T typically receives, but we have no reason to doubt the merchant's statement at this time. Padding interchange has become a more common scam throughout the industry as more companies switch over to interchange-plus pricing. This is because merchants rarely know which interchange rates should apply to each of their transactions. A markup of 50 basis points would be very noticeable if it was added to your interchange-plus quote, but it could easily be added to the interchange rates on your statement without raising a red flag.

Unfortunately, interchange is one of the last remaining “black boxes” of merchant account pricing, so merchants on interchange-plus pricing plans will probably benefit from conducting occasional inquiries into the interchange rates they're paying. If something looks off on your statement, or if your monthly costs suddenly increase without the addition of any new fees, you may be paying more for interchange. See our article about the most recent interchange fee updates from Visa and MasterCard, and make sure that your processor can tell you which exact rate you are paying on the linked pricing matrix. If you're a BB&T merchant, you may also want to take a look at your most recent statement.

Heartland's Rate Increase Explained

Back on December 21st, Card guy provided the following warning beneath our Heartland Payment Systems review:

Be aware come Feb Heartland will be increasing their fees on their smaller merchant base. It was only a matter of time until they finally hit their customers with rate increases and its coming so keep your eyes on your statements as it will be announced there.

We were unable to obtain details about these rate increases before they actually went into effect, but a Heartland agent named Kellie B. provided more information in a comment on March 12:

The fee increase only effects those customers who are no longer in contract and have been at the same rate for many, many years. It also only applies to those businesses who are doing significantly less volume from when we initially signed them. Every industry at some point and time have rate increases due to the economy and the price of doing business. Most of our competitors raise their rates within 6 months of signing. Heartland has always honored your rate while you are in your contract with them and beyond. Your price is locked in for the full 36 months but after that you could be subject to review. I explain this to every one of my clients!

If what Kellie says is true, then the only merchants who need to worry about rate increases are merchants who are no longer under their initial contract with the company and who have seen a significant decrease in volume, although she does not state the specific decline in volume that will trigger this. Although this is a much smaller pool of merchants than Card guy's initial post seemed to imply, it still strikes us as bad policy for two reasons.

First of all, merchants who have long since exited their initial three-year contract with Heartland will likely not be scrutinizing their monthly statements. They've had the same rate locked in for years, so why would they expect it to change? Moreover, merchants who are processing smaller amounts are by nature less capable of absorbing larger merchant account fees. Rather than imposing a blanket rate increase to ensure that these accounts remain profitable, Heartland should contact these merchants to see if they can restructure their pricing in a way that works for both parties. We're grateful to have more clarity on these rate increases, but the information we've been given does not make them seem more justified.

Northern Leasing Still Going Strong

Two new complaints from Will Frits on February 21 and Julie Do on March 9 beneath our Northern Leasing Systems review respectively state the following:

RUN as fast as you can. Read the CONTRACT!!! Don’t sign personal Guaranty! You will pay for the equipment 4-20X the cost of the equipment. They are brutal working with you and will ruin your credit and harass you with letters and phone calls! RUN!!!

This company is a total scam and they are still running their business every day. Sadly, they continue to steal from the small business owners with their hard earning money. STAY AWAY FROM THEM.

In addition, Dianne's February 21 comment on our review of a rarely used DBA of Northern Leasing called Golden Eagle Leasing suggests that Golden Eagle is still an active brand:

Never sign anything with this company – they do not return phone calls and make excuses for any issue you bring up to them. They are a scam

There's nothing particularly odd about these comments besides the fact that they are posted about Northern Leasing Systems, a company that the New York Attorney General has been actively trying to dissolve since April 2016. When news first broke of the Attorney General's lawsuit, we expected to receive fewer complaints about the company as it either scaled back its business practices or transitioned to a different brand name.

Much to our surprise, Northern Leasing continues to accumulate complaints at its usual clip and has even managed to receive a complaint about Golden Eagle, a brand that we thought had been retired by the company years ago. This serves as a useful reminder that merchants should remain wary of Northern Leasing and all of its known DBAs, including MBF Leasing, Lease Finance Group, and the aforementioned Golden Eagle. It's likely that the company maintains other brand names that we have yet to identify, which is one reason why we generally discourage merchants from signing any long-term equipment leases whatsoever.

The Hazard Of “Locked” Equipment

James Elliott's March 12 comment on our First Data review states the following:

Please please please heed the reviews if you are thinking of joining First Data as your merchant services provider. They are an absolute disgrace. The salesman will promise you the world probably including Amazon vouchers. You’ll never see them and after you put pen to paper you will never see him, he won’t answer your calls either.

You’ll also get great rates which will soon be doubled (or more). The real kicker though is that you’ll sign up for the terminal lease for 4 years but it turns out the terminals only work with First Data.

This means that when the inevitable fee hike occurs, you’ll have 2 choices a) accept the new fees or b) pay a huge terminal cancellation cost.

In a nutshell if you’re thinking of joining them DO NOT DO IT, YOU HAVE BEEN WARNED.

Although we frequently warn against long-term equipment leases, we don't always mention that merchants should also watch out for “locked” equipment, or equipment that is proprietary or exclusive to a certain merchant account provider. First Data is a major offender in this category, as its FD-branded credit card terminals and Clover POS equipment usually cannot function with any other credit card processor. This isn't a huge problem if you rent your equipment from First Data and can simply send it back when your contract ends, but purchasing or leasing the equipment leaves you stuck with a bricked system if and when you switch to a new processor.

To avoid this issue, be sure to investigate whether any of your equipment is proprietary or locked before you purchase it from your processor or on the secondary market. If it is proprietary, you will be better off requesting a monthly rental with no long-term commitment or buying a universal terminal on the secondary market. We also do not recommend long-term equipment leases under any circumstances, but they are extra hazardous with locked equipment. As James's comment points out, a long-term lease for locked equipment essentially commits you to that equipment's credit card processor for the life of the lease. Even if the processor breaches your merchant account contract by raising rates, you will need to stay with them to get any value out of your leased credit card processing hardware.

Have you had an experience that you would like to share with these commenters? Reply to their comments and you may be featured in next month's complaint roundup!

Reader Comments

Tell Us What You Think

1 User Reviews

  • Rojer Kramer

    First, Heartland fee hike is not just for merchants who are not in a contract anymore, I have personally seen one that says “if you do not accept this increase, you can cancel your account without any early termination fee” and that merchant was with them for less than two years in a 3 year contract.

    Second, no one should ever lease or rent a terminal. Just buy one every time you change your merchant account, look online, you can buy good terminals which work with your processor for $130-$250.

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