Know When Your Processing Contract Really Expires

Last week I was visiting with the owner of a small manufacturing company in Parsons.

I had shown him how to reduce his processing costs by sixteen percent, thus freeing up almost $60,000 a year to invest back into operations. His current rep had come down from Overland Park, and the last time they had spoken had been the day he signed the paperwork. His staff despised calling his current processor's customer service line; they said it was a mess of auto-messages, phone trees, and long hold times. Simply put, we were ready to do business together. All that remained was to verify that his contract with the other guys was expired, which he was confident had happened last June.

Well, it turns out he was right- sort of. And wrong- sort of. Nearly every processing company out there has a "rollover " provision in their contract- a fact that few processing reps even know about, much less inform their merchants of.

Say you sign a 3 year agreement with a $400 early termination penalty set to expire on May 1, 2012. Come May 1, you have a window, the length of which varies between processors, to notify the company in writing that you no longer wish to use their services. If the window is 30 days, when June 1 comes around and you haven't canceled, you are automatically rolled into another year's contract replete with the same early termination penalties you had in the first three years. Some companies roll you over once, some twice, and some roll their merchants until they cancel within the window or pay the penalty.

Dig out the fine print in your processing agreement, or have your company send you a copy. Find your rollover clause. Knowing how it works will save you some scratch should you ever desire to fire your credit card company.

Is There a Merchant Revolt Brewing Against the Credit Card Companies? Part 1

As credit cards increasingly take the place of hard cash businesses find themselves increasingly at the mercy of the credit card companies. Accordingly, the card companies have more leverage over merchants than ever before. When the life or death of your business is dependent on keeping Visa happy, if Visa institutes 'Slap A Merchant Fridays' then on Friday you line up to get slapped.

That's been the case until recently, when their have been a couple of signs that businesses have had enough. One such business is a Park City, Utah restaurant called Cisero's.

Visa and MasterCard both claimed that Cisero's allowed fraudulent credit card charges and broke the card companies security rules by keeping information on too many card accounts in the restaurant's computers.

When a business owner signs the contract with a credit card processing company, almost all of the fine print in the contract deals with the relationship between the business, the processing company (the processing company is a middleman who's job is to move the money around between all the parties involved in a credit or debit transaction) and the banks. Your agreement with the credit card companies, known as an operating contract, usually arrives one to three weeks later in the form of a Processing Terms and Conditions, Funds Transfer Instructions and Association Rules. It is 30 dense pages of illegible fine print and is unreadable by anyone except for top notch contract  attorneys.

This treatise, that a business owner either agrees to follow sight unseen by signing the processing contract or 'agrees by deed' when he processes his first credit card, is the source of grief for Cisero's. MasterCard and Visa used arcane provisions buried in the operating contract to fine the restaurant enormous sums of money and debit the funds from it's bank account with no warning, notice, or explanation. The credit card companies never proved their allegations nor gave the business an opportunity to answer the charges.

At first Visa said the amount of the 'actual fraud' was $1.26 million and Cisero's total liability was $1.33 million. The liability changed to $511, 513 when court papers were filed, and finally Visa said the restaurant owed $55,000. For their part, MasterCard said they could assess charges totaling $100,000 but was only imposing $15,000. They later added another $13,823 in 'loss claims'.

In Cisero's law suit against Visa and MasterCard it's lawyers point out that these shifting dollar amounts imply that the card companies were simply making the numbers up as they went along and contend that the whole mess is less about fraud than randomly taking money from small business owners that they don't expect to fight back:

"These various shifting numbers based on unexplained calculations” show that the “process is little more than a scheme to extract steep financial penalties from small merchants,” reads the suit.

The suit also brings up the operating contract:
"When the restaurant entered their first contract arcane operating rules- over 1000 pages in length- were not publicly available to merchants and didn't contain  provisions on data security."

Observers expect the card companies to settle rather than to expose and try to explain their operating procedures in open court and possibly providing more ammunition to interested trial attorneys.

Later in the week in Part 2 will be the story of a merchant based class action suit that caused MasterCard to cry 'Uncle".

You Can Keep Your Resolutions This Year.

It's January second. The tinkling noises you will hear over the next two to twelve weeks is the sound of 2012’s New Year's resolutions being broken all around you.

Year in and year out January is the month that gyms get the highest number of new members. Jenny Craig, Nutri-Systems and Weight Watchers all have their best months. AA and NA groups see more new faces in January than any other two months of the year combined, and on line book sellers deliver self-help books by the truckload. 

And next year will be the same, because statistics tell us that by the end of March only three percent of the people who made resolutions will still be following them.

What makes us unable, year after year, to make the changes we know we need to make in our lives, for our health, for our families, for our careers? It's not what you think. It's not laziness, or complacency, or sloth. It's because making those changes is damn near impossible.

Scientist who study the brain don't agree on much, but one thing they all seem to line up on is that when we have done an activity or engaged in a behavior enough to hard wire it in our brain as a habit then it becomes incredibly hard to unwire. This was very useful back when our food hunted us while we hunted it and hesitation was the difference between eating supper and being supper. But in modern times it means that dropping twenty pounds so you'll have a shot when you ask out the hot redhead in the next cubicle it near impossibly hard.

Near impossible, but not impossible. Remember, three percent of the people that set New Year's resolutions are still living by them three months later. That begs the question- what is different about that three percent, what do they do differently than the vast majority? Studies have given us two answers.

The first is that the three per centers are goal setters who write their resolutions down and refer to them often. Many successful resolution setters tell of leaving Post-its with their goals on the bathroom mirror, on the refrigerator, on the TV screen. One man made his cell phone ringtone a recording of his resolution, to be reminded every time his phone rang. It is hard to settle back into the old habits when the new ones are staring you in the face wherever you go.

Secondly, the people in the three percent know that changing their own behavior is going to be an enormous undertaking. They approach it with the single-mindedness of a tired marathoner approaching a steep hill. One foot after the other, keep plodding, don't quit, don't stop, must not let up. No matter the difficulty or the pain, unflaggingly putting one foot in front of the other. Until finally the hill is crested, the old habit falls away, and a new one snaps in to take its place.

That's the sort of effort it takes to make changes in our brain's hard drive. Very few are willing to put forth that effort. But the ones that do find success.

If you made a New Year's resolution (and are serious about wanting to make the change), write it down so that it is always on the periphery of your thoughts. And start running your hill. Good luck- hope to see you on the downhill side