If your business is involved in actual or threatened legal disputes with a payment processor, call us here at Revision Legal. Our number is 231-714-0100. We are internet and business attorneys with proven experience with internet law, contract law, and complex litigation. We can also help with the legal aspects of your payment processing services long before disputes arise. This involves a deep analysis of payment processing contracts. Businesses have options, and some payment processing contracts — often just a processor’s Terms & Conditions — are much better than others. Further, some of these contracts are subject to negotiation and re-negotiation. There are many problematic contractual provisions included in many of these contracts, including:
- Automatic renewal provisions and onerous termination procedures
- Penalties or fees for terminating the contract
- Excessive “hold” times for payments made before monies are released to the merchant
- Clauses allowing the processor to hold funds — often called “reserves” — that do nothing more than punish the business
- Default clauses allowing a process to seize funds without legal process or a court order, particularly where the seized — or frozen — funds far exceed any amounts in dispute
- Clauses that allow a processor to access financial accounts not used or linked to the payment processing service
- Acceleration and rate-hike clauses without recourse (and sometimes without notice)
- Personal guarantee requirements — and the various provisions contained therein
- Excessive non-monetary collateral requirements
- Hold harmless, indemnity and limitation provisions that essentially make the merchant liable for all adverse events and contingencies
- Onerous and inconvenient forum and venue selections clauses and choice of law clauses
To the extent possible, a business should avoid entering into any payment processing agreement that features any of these types of one-sided provisions. Success or failure of any litigation with a payment processor will largely turn on what the service contract states. While it is possible to argue that certain contractual provisions should be unenforceable as a matter of public policy or that clauses should not be enforced for equitable reasons, such are difficult legal arguments to win. It is best to enter into a payment processing contract that is fair to both parties.
Another major legal concern is that many payment processors are, in effect, intermediaries between merchant businesses and payment companies, like Visa or Mastercard. Thus, it is essential to have a legal understanding of the contractual policies and procedures of particular card payment companies and associations. Likewise, there are laws, rules, and regulations with respect to payment processing involving direct fund withdrawals from consumer financial accounts. Further, federal and State-level financial laws and regulations are implicated with respect to payment processing arrangements. Your business needs to understand this complex interplay before entering into a payment processing contract.
Doing Your Due Diligence
Aside from legal advice and help with negotiating the processing contract – or at least understanding the processor’s Terms & Conditions – a merchant must engage in some additional due diligence when considering a payment processing company. A few questions to ask include:
- What is the level of confidentiality and data security for your business’s confidential information?
- Is the processor compliant with consumer privacy laws?
- Does the processor have state-of-the-art cybersecurity to prevent hacking, unauthorized access, and other loss of data?
- Does the processor have a department to assist merchants with disputes?
- Is there a phone number to call, and can you get a live person on the phone?
Contact Revision Legal If you need help with a payment processing dispute, contact the internet and business lawyers at Revision Legal. You can contact us through the form on this page or call 231-714-0100.