By Steven Feldshuh
Recently, GS Online's MLS Forum was lit up with discussions about processors and gateways pushing through fees that were not part of the schedule of expenses in agents' contracts. It seems to be a hot button that should be opened up and discussed.
No one really wants to push additional fees onto merchants. The one thing we all know is merchants do not like receiving letters announcing cost increases. I feel extremely fortunate in that my processor doesn't put through any increase unless it is agreed upon beforehand in the office ‒ with a revenue share. The people at our processor understand the integrity of their contract with us.
The question is, though, how should processors deal with the continued increased costs they face. As a small business owner located in New York City, my costs of doing business continue to increase. Even with efficiencies, the human cost of wages, health insurance, rent and so forth continue to increase every year. My landlord isn't concerned about my situation, nor is the business health insurance provider.
Obviously, to keep great employees, one must continue to take care of them. Add to that the costs processors have with boarding, risk, tech support, customer service, compliance, legal and losses from risk, one can understand why they would like to put through increases. Think of the costs of developing new programs that may or may not prove to be good investments. We, as a sales office, always want more. Whether, it is more products, better cost structures or freebies, we want it.
But putting through well-thought-out increases, based on a value proposition such as increasing a Payment Card Industry security standards compliance fee while also increasing compliance services or increasing the cost of online access, but giving a program providing analytics, to me, are fair increases. So that brings us to what the discussions in the MLS Forum are about. You can be the judge of whether certain increases are fair or not.
One forum member mentioned that a well-known, large processor put through a new $299 EMV annual fee. That is almost $25 a month, which seems to be excessive and has gotten a lot of negative feedback. I can assure you if my office ever had that fee put through, I would see an uprising from our sales agents. One hundred percent of them would be against such an attrition-causing cost. I would guess that we would receive countless complaints from merchants, and those that didn't call would say, enough is enough and just leave.
Another comment on the forum was from a sales office that received a 6-basis-point increase on a gateway expense. As far as I know, none of the gateways I have ever worked with have had a discount charge. They typically have a monthly fee, and sometimes an additional transaction fee.
It is quite possible that this sales office is being taken advantage of by whoever in the chain is above them.
The practice of ISOs passing through additional costs to their sub-offices is ongoing in our world. Here is my thought for anyone contemplating signing up with a new group: thoroughly read the contract you are signing. Have an attorney with industry experience review what you are planning to sign, as well. Do not sign an exclusive unless you are positively sure of the ethical nature and practices of the entity you are dealing with.
I, like many of you, used to think we were protected if we had a signed contract. However, as several contributors noted in the MLS Forum, wording can be interpreted in several ways. Differences of opinion regarding what a contract's terminology actually means can lead to acrimony and significant business losses. Suing a large ISO or processor is possible, but do you really have the deep pockets and time to try and obtain a favorable settlement?
A suggestion I received and endorse is that if you start to experience anything that causes you to question your decision about the ethics of the company you signed a contract with, move on. I can pretty much guarantee you if you are new in the industry, your first choice of an ISO partner may not be the best choice. We have all been lured in by the promises of huge signing bonuses, only to find out if, for example, a merchant brought in by an agent leaves in a year, the bonus is pulled back.
Most of us have been put in situations where our costs increased, but we were never notified. Some of us have filled out merchant applications not realizing we were having our merchants sign an agreement with coding we were not schooled on that plays around with card brand fees, such as higher assessment or access fees than are published by the card companies.
Another suggestion I received from the field is that you wouldn't invest your hard earned dollars in the stock of a company that has financial issues unless you understand the market and have a tolerance for the high risks associated with gambling. Well, the same can be said about the company you work with. It is definitely worth the time to investigate the entity you are going to commit too.
Not only should you find out about the company's culture, you should also determine how much debt the company carries. A super-ISO that is struggling under a huge debt load may do some things that could prove to be detrimental to your business. A debt-ridden ISO may be forced to play games with its merchant base and with your residuals. So be smart and investigate.
Steven Feldshuh, President of Merchants' Choice Payment Solutions East, has 18 years' experience in sales and ISO development. Directly prior to joining MCPSE in 2012, he was President of Payment Partners. In his current position, Steven devotes the bulk of his time to assisting agents in building their portfolios. Contact him by email at email@example.com or by phone at 212-392-9202.
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