First Data Corporation (firstdata.com) is a large electronic payment processing company headquartered in Atlanta, Georgia. The company’s main bread and butter is providing back end card processing services to Independent Sales Organizations (ISOs), banks, and other merchant account providers across the world. It has also recently broken into the point-of-sale software market with its Clover POS system. Frank Bisignano is the chairman and CEO of First Data.
Unlike most merchant account sales organizations, First Data is a direct processor with Visa & MasterCard. While the company does have a small direct sales force, First Data relies primarily upon partnerships with third party resellers and sub-ISOs to sell its credit card processing services and equipment leases through First Data Global Leasing. Two of these resellers include a couple of the largest banks in the United States, Wells Fargo Merchant Services and Bank of America Merchant Services. These two partnerships along with thousands of others make First Data one of the largest processors in the world (if not the largest). In fact, it is said that roughly 45% of all credit card sales in the U.S. are processed by First Data.
We have recently been made aware of a pending lawsuit filed against First Data by a First Data reseller called Peel Payments. Among other things, this lawsuit alleges that First Data has dramatically increased some of its merchants’ authorization fees from $0.05 per transaction to more than $0.60 per transaction in under two years. Even in the most extreme card-not-present payment environments, authorization fees typically do not exceed $0.30. In light of these allegations, First Data merchants are advised to check their statements for any fee increases.
Sales & Marketing
Key Points - Sales & Marketing
|Uses independent resellers?||Yes|
|Promotes deceptive rate quotes?||No|
|Discloses all important terms?||No|
As stated earlier, First Data primarily markets its services through an army of resellers and affiliates. The company has its own direct sales offices, but these make up a tiny fraction of First Data’s overall sales force. The company has suffered considerable damage to its reputation due to many of its resellers using misleading sales tactics and deceptive marketing. With independent sales offices located across the country, it may simply be beyond First Data’s capabilities to manage the conduct of its sales agents on a local scale. First Data appears to do a poor overall job of policing its ISOs and eliminating bad partners.
Aside from its heavy use of resellers, First Data does not appear to use misleading advertising or deceptive marketing through its own sales force; however, there are a considerable amount of complaints that describe the use of deceptive sales practices among its agents. It appears that many agents fail to mention buried contract commitments, most commonly lease terms for point-of-sale equipment provided by First Data Global Leasing. Merchants are advised to request complete copies of their merchant application, program guide, and equipment lease terms before signing up for service.
First Data Marketing Example
Costs & Contract
Key Points - Costs & Contract
|Termination fee:||Up To $495|
|PCI compliance fee:||Variable|
|Equipment lease:||48 Months, Non-Cancellable|
As a direct processor, First Data sets its rates slightly above interchange and then allows resellers to mark up the wholesale costs in order to sell credit card processing services to merchants at a profit. It’s a popular misconception that going directly to First Data, instead of a First Data reseller, will result in lower processing fees. In some cases working directly with First Data may result in rock-bottom rates (see “Fee Sweep” to learn how to negotiate for the best rates), but often the company’s direct sales channel is just as expensive as its resellers.
Pricing and fees of a First Data merchant account will vary by reseller, agent, and merchant. First Data allows resellers to choose between selling month-to-month contracts or service agreements ranging from one to five years. Cancellation fees and contract conditions can vary widely by reseller, so merchants are advised to read their contracts carefully. Many merchants also report non-cancellable, multi-year leases for point-of-sale equipment offered by First Data Global Leasing. Generally speaking, First Data will enforce the contract terms set by a reseller as long as they fit within the company’s sales policies. See the First Data Program Guide.
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Complaints & Service
Key Points - Complaints & Service
|Live customer support?||Yes|
|Most common complaint:||Hidden fees|
When it comes to customer service, First Data has the ability to service its merchant account customers directly via a 24/7 customer service call center, or resellers can provide their own customer service. First Data also offers customer support options for resellers at an additional cost to the reseller. In a few First Data reviews, merchants have reported confusion about the company responsible for servicing their account.
First Data has a high volume of complaints, with over 400 in the comment section below and over 350 more on Ripoff Report. Most of these complaints report deceptive sales tactics used by some resellers and agents, poor customer service, inability to resolve disputes over billing and service commitments, and omissions of important contract terms prior to account setup. Additionally, several merchants who reported signing up through resellers state that they were placed into contracts directly with First Data or into equipment leases without proper disclosure of important terms and conditions (for instance, non-cancellable leases for point-of-sale equipment). The quality of customer support when resolving these issues may vary depending on which aspect of the contract is at issue.
Key Points - BBB
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.
The Better Business Bureau is clearly having difficulty distinguishing between First Data itself, its independent sales channels, and its resellers. There are numerous profiles on the BBB website that are clearly just resellers of First Data, yet the BBB attributes these pages to First Data itself. On the actual report for First Data’s corporate headquarters, the BBB awards an “A+” rating overall. This score is awarded despite the company’s accumulation of 1,050 complaints in the last three years (up from 1048 since our last review) and its responses to these complaints. The majority of complaints are due to billing and collection issues, problems with products or services, and advertising and sales issues. Of the complaints, 18% were resolved through the BBB to the merchants’ satisfaction, while the remaining 82% of complaints either were resolved to the dissatisfaction of the merchant or did not receive a final assessment from the merchant. We have adjusted the company’s rating to a “C” in light of these figures.
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
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