Founded in 1999, Federated Payments (federatedpayments.com) is a merchant account provider that also offers a variety of other 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.
Federated Payments Products and Services:
- Debit and credit card processing
- Gift and loyalty programs
- Check acceptance
- Credit card processing hardware
- E-commerce solutions (via SafePay)
- Merchant cash advance
- Virtual terminal
|Key Points – Sales & Marketing|
|Uses independent resellers?||Yes|
|Promotes deceptive rate quotes?||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 promotes a $500 price-matching guarantee that promises to give a merchant $500 if they can 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.
Federated Payments Marketing Example
|Key Points – Costs & Contract Terms|
|PCI compliance fee:||Unknown|
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 $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.
|Key Points – Complaints & Service|
|Live customer support?||Yes|
|Most common complaint:||Sales tactics|
Federated Payments has appeared as the subject of roughly 45 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 below, 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 Report|
Federated Payments scores an “A” rating with the Better Business Bureau and is not accredited at this time. Within the last three years 36 complaints have been filed against the company, which is down from 55 as of our last update. The majority of the complaints concern problems with services and products, with billing and collection problems coming in second. Of the 36 complaints, 34 were resolved to the satisfaction of the complainant with the assistance of the BBB.
The BBB has also 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 these updates, the Federated Payments “About Us” page still displays these claims that have been contested by the BBB. It also erroneously lists itself as BBB-accredited. In light of these figures and notices, we have adjusted the BBB’s rating to a “C.”
Federated Payments rates as a typical merchant account provider according to our standards. The company can improve its rating by reducing the number of complaints filed by its own employees, offering more competitive contract terms, and listing those terms more transparently. Merchants are advised to carefully scrutinize the terms of any contract they are given, especially with regard to the advertised $500 guarantee.
This review was originally published on 3/22/12 and was last updated on 1/9/15.
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