Founded in 1999, Federated Payments (federatedpayments.com) is a merchant account provider that also offers a variety of merchant services. The company is a moderate-sized provider within the industry, having eclipsed 25,000 merchants in 2008. Federated Payments is sponsored by Deutsche Bank AG, New York, as its Acquiring Bank and is headquartered in Melville, New York. The company’s founder and president is John Guirguis, and its CEO is Jon Levitt.
Sales & Marketing
Key Points - Sales & Marketing
|Employs Independent Resellers||Yes|
|Advertises Deceptive Rates||No|
|Discloses All Important Terms||No|
Federated Payments appears to utilize telemarketing and hiring of independent sales agents to market its services. This “hiring mill” model often produces agents who are trained to sign merchants to the most expensive contracts possible in order to receive a higher commission. In fact, many of the complaints filed publicly against Federated Payments appear to have been written by employees who are dissatisfied with the company’s policies and their compensation. This is an indicator of a less-than-positive corporate culture.
In addition, the company’s website formerly promoted a $500 price-matching guarantee that promised to give a merchant $500 if they could find a competitor who offers lower rates for the same product and contract terms. Judging from the company’s website and several complaints filed online, it seems as if merchants must first sign a contract with Federated Payments, and if they can then find better pricing from a competitor within 30 days, the $500 amount is awarded in the form of Federated Payments waiving their early termination fee. Due to some complaints reporting confusion about how this works, merchants are advised to seek clarification about this guarantee before agreeing to it.
Costs & Contract
Key Points - Costs & Contract
|Early Termination Fee||$295-$500|
|PCI Compliance Fee||Unknown|
|Equipment Lease Terms||Variable|
According to merchant complaints, Federated Payments appears to offer standard rates and fees, including a monthly statement fee of $5.95 and an early termination fee of $295-$500. These figures are about average for the industry. Some complaints report a standard contract length of three years, but given the company’s apparent strategy of employing independent sales agents, contract terms are likely to vary from agent to agent. Merchants are advised to keep in mind that a number of contract terms may be subject to alteration at the discretion of the agent and to negotiate accordingly (see: Fee Sweep).
Get EMV Compliant Today
Complaints & Service
Key Points - Complaints & Service
|Total Online Complaints||50+|
|Live Customer Support||Yes|
|Most Common Complaint||Sales Tactics|
Federated Payments has appeared as the subject of roughly 50 complaints on this and other customer protection websites concerning allegations of fraudulent practices, employment issues, or misrepresentation. Many of these complaints appear to have been authored by former or current employees and agents of Federated Payments, who report unethical business practices and meager compensation for their work. This is a troubling trend that would seem to indicate a failure by the company to resolve matters in-house. One such complaint, found here, describes the company as a boiler room operation and reports that “[a]ll of the merchants were so pissed at us that either they hung up or wanted to curse me out.”
Complaints by merchants tend to cite undisclosed fees, unavailable agents, and confusion over the $500 guarantee. Some of these complaints have received rebuttals from the company’s representatives. The company’s website lists numerous dedicated support phone lines on its “Contact Us” page.
Key Points - BBB
|Product & Service Complaints||4|
|Billing & Collection Complaints||5|
|Advertising & Sales Complaints||1|
|Guarantee & Warranty Complaints||0|
Note: We have adjusted this company’s BBB rating according to our own standards. To better understand why we adjust BBB ratings, please see our Rating Criteria.
Federated Payments scores an “A+” rating with the Better Business Bureau and has been accredited since January 2016. Within the last three years 10 complaints have been filed against the company, which is down from 36 as of our last update. Four complaints were related to product or service issues, five had to do with billing and collection, and one was related to advertising or sales. Five complaints were successfully resolved, while the remaining five either were resolved to the dissatisfaction of the merchant or did not receive a final response from the merchant.
At the time of our previous update, the BBB had posted the following notices on its profile for Federated Payments:
This firm has misrepresented itself as a BBB Accredited Business on its Web site at http://www.federatedpayments.com/. On June 24, 2014, the BBB requested that this firm cease and desist all unauthorized use of the BBB name and logo on its website. THIS FIRM IS NOT CURRENTLY A BBB ACCREDITED BUSINESS with the Better Business Bureau Serving Metropolitan New York, the service area in which it is headquartered.
On July 07, 2014, the Better Business Bureau raised concerns about this firm’s advertisement on http://www.federatedpayments.com/ and requested that this firm substantiate their claims regarding the following:
1.We Guarantee we can beat your current processing rates or we’ll pay you $500!
2. Credit and Debit card processing at the lowest rates guaranteed
3. Inc. Magazine 500/5000 ranked company
4. Top 50 Payment Processors in the U.S. (2 years in a row)
5. The fastest growing Payment Processor in the U.S. (Nilson Report)
As of August 11, 2014, the business has not responded to BBB’s requests for clarification or modification of the aforementioned issues.
As of this update, the Federated Payments “About Us” page still displays some of the claims that were contested by the BBB, but the BBB has removed these notices. In light of the company’s dramatically altered profile, we have slightly adjusted the BBB’s rating to an “A-” for the purposes of this review.
About Phillip Parker
Phillip Parker is a former merchant services agent turned small business advocate and the author of "Fee Sweep," which teaches merchants how to dramatically lower their processing rates, eliminate junk fees, and avoid fine-print scams. He founded CardPaymentOptions.com to help merchants enact positive change in the credit card processing industry. Schedule a Consultation with PhillipSchedule a Consultation with Phillip
Copyright & Disclaimer
Copyright © CardPaymentOptions.com, Inc. (Digital Fingerprint: 0d38c6720f0d78a701b74d58653af608). Getting paid to re-write this page? Click here to earn a reward.
Any unauthorized copying and reproduction of the content of this page, including all meta data and computer code, is strictly prohibited. While the information in the above article is believed to be accurate as of its publish date, the author and publisher make no representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the contents. The author and publisher shall in no event be held liable to any party for any direct, indirect, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this material, which is provided “as is,” and without warranties. Any and all use of trade names and/or marks are for identification purposes only and shall not be construed as a claim of affiliation, or otherwise, with CardPaymentOptions.com, Inc. ("CPO") in any form. The sole purpose of the material presented herein is to alert, educate, and inform readers. It is not intended as legal or financial advice.