How Well Do You Know Your Payment Processor?
October 13, 2022
Reading time: 3 minutes
While many large companies handle payment processing in-house, small and medium-sized businesses often outsource this task. The vast majority of third-party payment processing services are reputable, established companies that can be trusted to handle a company’s funds securely. However, there are more than a few bad apples in the industry [as this article from Loudoun Times illustrates].
According to a July 2022 indictment filed by the Department of Justice — U.S. Attorney’s Office Eastern District of Texas, several former executives and company leaders of a payment processing company allegedly perpetrated a multi-million-dollar credit card fraud that defrauded approximately 7,000 clients out of millions of dollars. The funds from these fraudulent charges were allegedly misdirected for personal use by the defendants, including luxury vehicles, high-end real estate, and cold, hard cash in the form of multimillion-dollar bonuses. The defendants were charged with conspiracy to commit wire fraud and conspiracy to commit money laundering, charges that carry prison terms of up to 30 years.
It should be noted that an indictment is simply an allegation, and all defendants are considered innocent until proven guilty beyond a reasonable doubt in a court of law.
While fraud schemes like this can be devastating, business owners and managers can protect themselves by keeping a watchful eye for the following red flags.
Matt Clyne, the CEO of PayTech Trust, recognizes that these types of practices do not reflect well on our industry. We need to set a very high bar of what are acceptable standards and be very transparent with our pricing to merchants. Processors should spend the time trying to educate their clients on the nuances of payment pricing, and then the merchants can hold their vendors accountable to meet those obligations.
Concealed Processing Fees
The fee structure for payment processors should be transparent – with fees clearly labeled and their purpose explained. So-called “qualified” or tiered pricing is often presented with an extremely low quote. But the caveat is that only certain transactions qualify, and extra fees are charged for everything else. Beware of unidentified “interchange fees,” which often disguise hidden markups. Look for transparency and clear descriptions of the types of transactions to which interchange fees are applied.
Misleading Language in Communications
As a business owner, you have the right to have unclear contract terminology explained in clear language. Misleading information in email messages and other account-related exchanges represents a definite red flag. Companies are entitled to and should demand a transparent fee structure from a payment processor in any billing and account statements. Beware of opaque or misleading language in contracts, especially invoices – they often disguise hidden markups and surprise charges.
Practicing due diligence before signing a contract can minimize the risk of becoming a victim of a scam. Check the payment processor’s listing with the Better Business Bureau and any complaints filed by past customers. Conduct an online search for references, and check multiple references, such as Google, Yelp, or online complaint forums. Don’t be afraid to inquire with a payment processor about any questionable items – and don’t hesitate to walk away if the answers provided are less than satisfactory.
The take-home lesson is that avoiding being a victim of unethical practices and misconduct is possible by spotting the warning signs early on. Contact a PayTech Trust professional through our website today for additional information and assistance in finding a trustworthy payment processing provider.
PayTech Trust offers secure merchant accounts and online credit card processing for businesses of all sizes. With our collaborative suite of services and best practices to integrate new payment trends, PayTech Trust has the experience and the expertise your business needs.Call Us Contact Our Sales Advisors