We are receiving some significant complaints from ISOs about a check company called Check Guarantee Service (or CGS WorldWide) of Arlington, Texas. The overriding complaint is that they do not do what they tell ISOs or merchants they are going to do.
The Texas Attorney General's Office has taken 30 complaints about this company in recent months, and the Fort Worth Better Business Bureau (BBB) is also concerned. "It does look serious," says Robert E. Reyna, assistant attorney general in Dallas. The main problem seems to be with the line in the CGS contract which states "Assignee shall pay Merchant 90% of the face value of all checks..."
The Better Business Bureau's file on CGS has been open since August of 1994. Complaints filed with the BBB about CGS have to do with such matters as "contract confusion," "length of time for refund when the contract is cancelled," and the "collection methods." The BBB file states that CGS has responded to the complaints with explanations and/or refunds.
In addition to the complaints we've received, stories are also appearing in newspapers, with serious complaints from merchants. The Green Sheet asked for permission to reprint one such story, which appeared in the April 1, 1998 San Diego Tribune, however, the request to reprint was denied.
According to Steve Norell of U.S. Merchant Services of Florida, an ISO who was selling the service, CGS paperwork says that NSF checks will be automatically forwarded to CGS, and 90 percent of the face value of the check will be paid. In selling the product, Steve notes that some retailers don't get paid the money they were promised and they can't get their money back when they cancel. Steve also reports that CGS will bill the ISO $10 if they have not filled out paperwork correctly. Steve states that CGS responds to complaining ISOs by stating that the merchants do not understand the contract, and that the contract does not promise a 90% payment on all checks, in fact not even on all NSF checks.
Seemingly in response to complaints, CGS has created a revised purchase agreement and bank authorization. They state that, "We have made some simple, but noticeable changes to the old agreement . . ." The new agreement addresses the cancellation policy and cost of terminating the contract. It states that when a merchant terminates the agreement, "Merchant shall be responsible for all service fees not to exceed $75 in closing Merchant's account with Assignee [CGS], plus handling fees not to exceed $25 per check and service fees not to exceed $9 per check."
The contract continues, "Assignee [CGS] reserves the right to take assignment of any check delivered to it, cease acceptance of Merchant's check at any time, and be allotted an additional discount of thirty-nine percent on any check(s) not complying. . ." It also states, "Merchant reserves the right to forward any existing or old checks to assignees at a purchase rate of fifty percent. Assignee reserves the right to accept or not accept such items for purchase."
The Green Sheet, Inc., has received reports that merchants are in fact getting billed for closing their accounts. One was billed $150. Additionally, we have received reports that when merchants who have cancelled try to stop the auto forwarding of their checks to CGS, the bank has informed them that they are unable to do so.
In my discussions with ISOs in California, Texas, and Florida in May, I noted that it would appear once again that when things look too good to be true, they often are. Buyer, or in this case seller, beware.
If you would like to hear the BBB report on CGS yourself call their automated phone system at (817) 332-7585, 24-hours a day, seven days a week. If you wish to contact CGS call (817) 226-3734.
