Have Scammers Been Emboldened?
The credit card processing industry has a long-standing reputation problem. Several factors contribute to this issue, but at its core, the problem stems from greed and inadequate oversight. Both card networks and the U.S. Government have failed to protect small businesses, leaving them vulnerable. As a result, the merchant services industry is a market where business owners need to be cautious and do their due diligence.
Don’t Expect Regulation Anytime Soon
The recent changes at the Consumer Financial Protection Bureau, combined with a broader policy of deregulation, have increased the need for small businesses to protect themselves against common sales scams in the merchant services industry. According to reports from business owners, one scam that’s making a comeback is “slamming” – a tactic that was prevalent about a decade ago. This highlights the importance of vigilance in today’s market.
What is Slamming?
The term “slamming” originated in the 1990s during a period of deregulation in the telecom industry. It described deceptive sales tactics used to switch consumers’ long-distance phone services without their consent. The term implies a quick and forceful takeover.
In the merchant services industry, slamming often involves telemarketing tactics where scammers misrepresent themselves as the business’s current card processor or a representative of card networks. They may use generic names like “Card Association” or “Merchant Services” to sound legitimate. These callers typically claim to be conducting a rate and fee review or say they’ve identified errors in the business’s processing statement. Their goal is to quickly trick business owners into switching credit card processors. Some scammers hide expensive cancellation fees and long-term equipment leases in the fine print, making it difficult for businesses to escape unwanted contracts.
Is Slamming Legal?
The short answer is no. However, some merchant services companies engage in slamming tactics that fall into a gray area. As long as they don’t explicitly claim to be the business’s current processor or forge documents, they may avoid liability. If business owners take the time to read the contracts they sign, they’ll likely realize they’re switching providers. In these cases, the blame often falls on the business owner for not reading the fine print. While this may seem unethical, certain forms of slamming are technically legal under many state laws.
The card processing industry has a poor track record of policing companies that use aggressive and deceptive telemarketing tactics. Often, it’s a matter of one party’s word against another’s. These operations may only be shut down by state regulators or forced to rebrand after their tactics are exposed online.
How to Avoid Getting Slammed
To protect yourself from scams, it’s essential to understand that your credit card processor or card networks like Visa and Mastercard won’t call you out of the blue to offer lower processing costs. If someone calls to discuss your fees, it’s likely a sales pitch. If a caller tries to gain your trust through other means, verify their identity by saying you’ll call the customer service number on your statement. Any resistance to this should be met with an immediate end to the call. This final step can help you avoid falling victim to most types of scams.
What To Do If You Are Victim of Slamming
Slamming tactics are getting more sophisticated, whichis causing more people to fall for them. If you feel as though you were tricked into switching you merchant services, here’s what you can do:
- Leave a comment at the end of this article.
- Tell us the name of the company and the tactics they used. We’ll be sure to post warnings to help other avoid them.
- Report the issue to the company’s Acquirer.
- Most companies that engage in slamming are acting as resellers of actual processors, known as “Acquirers” within the industry. The Acquirer will be stated in the contract that you signed and can often also be found in your statement. Common Acquirers are Fiserv, Elavon, JP Morgan Chase, and Global Payments.
- Submit a complaint with Visa and MasterCard.
- Both of the card networks offer merchant complaint forms to report unethical and illegal activities.
- Contact your State’s Attorney General.
- They may not help you reach a resolution but if enough reports are filed, you State may take legal action against the perpetrator.
- File a report with the Federal Trade Commission.
- Filing a report on reportfraud.ftc.gov help the Federal Government better understand potential areas of regulation and could cause them to take action against the worst offenders.
Bottom Line
Slamming is increasing and may get worse over the next few years. Luckily its easily avoided with a little education. Even better, work with an award winning low-cost credit processor that has passed our stringent review guidelines to ensure that you are always getting the lowest costs and best services.
