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 appears to be the flagship member of The Federated Group, a network of companies that includes Volt Payments, National Debit Card Network, MSI Canada (msicanada.net), U.S. Bankcard Center (gotousbc.com), and Wholesale Merchant Services Canada (wholesalemerchantservices.ca). There is also some evidence linking The Federated Group to Smart Choice Payments, First Choice Payments, Wholesale Merchant Processing, and North American Processing Solutions. 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: Federated Payments appears to hire independent sales agents and has received a moderate number of complaints about its sales practices.
- Costs & Contract: Federated Payments appears to offer a multi-year contract with an early termination fee ranging from $250 to $500.
- Complaints & Service: Federated Payments has received more than 50 public complaints.
- BBB Rating: Federated Payments has an “A” rating with the Better Business Bureau and has received five complaints in the past three years.
- Rates & Fees: How Merchants Got The Best Rates With Federated Payments
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, an annual fee of $99, 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).
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||3|
|Billing & Collection Complaints||2|
|Advertising & Sales Complaints||0|
|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, five complaints have been filed against the company, which is down from 10 as of our last update. Three complaints were related to product or service issues and two had to do with billing and collection. Two complaints were successfully resolved, while the remaining three 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 dramatic improvement to its complaint rate, we agree with the BBB’s rating at this time.
About Phillip Parker
Hi, I’m Phillip and I’m disgusted by the state of credit card processing in the U.S. and abroad. I believe that the industry has been overrun by people who engage in fraud and deception in order to steal money from hard working business owners. I’ve made it my mission to expose the companies and individuals who engage in predatory marketing, pricing, and contracts, or just provide terrible service. Along with uncovering the bad guys, I’ve also discovered the good guys who do stand out from the status quo. CPO is a website where you will find ratings and reviews of these companies along with advice on how to save money and which service providers consider. Together we can move the industry in a positive direction. If you would like to help support my work, please checkout “Fee Sweep” my eGuide to getting the lowest possible fees when accepting card payments. If you haven’t heard of “interchange” this advice will save you hundreds, even thousands, in processing fees.Schedule a Consultation with Phillip
Related: Phillip’s Top All-Purpose Merchant Account Picks
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