The Hidden Dangers of Dealing with Credit Card Processing Auditing Companies

The Hidden Dangers of Dealing with Credit Card Processing Auditing Companies.

You might find this to be an interesting topic coming from me. After all, I run an auditing firm that specializes in all aspects of credit card processing fees.

The only thing worse than getting overbilled by your credit card processor is to get duped by someone claiming to be experts in this industry, and then get sued by them for non-payment after you stop paying them once you realize you have actually been duped. 

If you need help with your credit card processing fees, you should make sure the company you are hiring employs experts in this field and you need to know what qualifies them as a “experts.” LinkedIn is a great tool to validate their work experience; however, some don’t even show who their owners are. At that point,  you have to ask, “Why HIDE that information?” Truth is, credit card processors are notorious for hiding information. Is it because the company you are looking at is owned by one of the credit card processors?  I’m sure if you asked them, they would say, no – but then why not make their ownership public information that can be validated?

Like an iceberg, which seems harmless at first glance, can rip a big hole in a boat, and what appears to be a harmless audit agreement can rip an even bigger hole in your business. When things are hidden, there’s a reason, and it is not to surprise you in a good way like a birthday present.

Before you think I am being too hard on these guys, remember, YOU (the merchant) will pay the price for their lack of experience and deception. They’ll make you sign an agreement before you even know if you have an issue, locking you into a three-year contract and giving them as much as 50% of whatever they forecast in their assessment.

Here is a real-life example of how that can turn out… I was hired as an expert witness to help a merchant that was being sued by one of these types of companies. The merchant was not happy with the savings this company had forecasted and promised. So, they decided to outsource their credit card processing to a third party so that the merchant now had no merchant fees. Because of this, the company sued this merchant for 50% of what their total bill used to be. Now, this was a very large merchant, so the liability was in the millions. The good news is that we beat that company in court, due in large part because they duped the merchant into signing with them by claiming to be experts, and it turned out they had zero experience in merchant processing. To put “experience” into the proper perspective, it takes a minimum of two years to get just the basics down and ten years to have a decent comprehension.

Due to these companies’ lack of experience and understanding of this industry, they will typically only focus on getting your discount rate lowered; however, you can do that yourself. Just call your processor and complain, and 90% of the time, they’re going to reduce your rates just because you asked. But when you hire a company like this to do this for you, things will get worse, not better. Remember, you will have to pay that company 50% of your savings because you allowed them to make that phone call. But here is the worst part – merchant processing is unregulated. Why does that matter? First, let me validate what I just said:

So, again, why does the lack of regulation matter? Because it gives credit card processors the ability to charge merchants anything they want. They simply raise merchants’ fees, hide fees by inflating interchange or other standard fees, or even make-up new fees, etc. For example, this type of company may get your discount rate lowered by ten basis points, but the processor will simply make that money back by doing one of these deceptive billing tricks. Or even worse, they may also raise your fees more than the ten basis points they previously lowered.

What does this mean for you?…

Let’s assume you were paying twenty basis points for your discount rate. This company you hired got it down to ten basis points and takes five basis points (50% of your savings), so your net savings is only five basis points. Your processor, in return, inflates your interchange and/or adds a new fee. And even if we assume they only want to get their profits back and not go even higher (which we see all the time), this will now put you paying five basis points more, and potentially even MORE! Once you realize this and stop paying, that company will sue you. What was once a great idea has now turned into a nightmare.

If you are going to hire a company to negotiate and help manage your credit card processing fees, you need to make sure:

• • Who are their key people?
  • What is their experience?  (And validate them on LinkedIn as well as Google.)
  • Will they take a percentage of your savings?
  • Will they lock you into a contract?
  • Does that contract allow them to sue you for non-payment?
  • Do they have their own proprietary auditing software or do they use a third party?
  • Do they have a money back guarantee?
  • Do they have any financial connections to any processor, ISO, MSP, or sales agents?
  • Do they pay revenue share to anyone or any company, etc.?

You will want them to answer the above questions on company letterhead and have it signed by an officer. Phone calls and emails are not binding, and anything in writing is not binding if not signed by an officer. This is VERY IMPORTANT!

You can find more information on how to protect yourself and your hard-earned profits in my newest book, “The Great American Heist – How Credit Card Processors Steal Businesses’ Profits.”

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