Twenty Vermont businesses will benefit from a $169,000 restitution agreement between the State of Vermont and Merchant Processing Solutions, LLC, a Los Angeles-based credit card processing company doing business as Payment Systems, according to Vermont Attorney General Bill Sorrell. Payment Systems has agreed to enter into a consumer protectionsettlementthat will require it to make restitution as well as pay $100,000 to the State of Vermont. The settlement resolves the Attorney General’s claims that Payment Systems misrepresented the cost of its services and failed to provide legally-required notices of the local merchants’ right to cancel their contracts with the company. According to Attorney General William Sorrell, “The settlement shows how important it is to ensure that Vermont businesses are protected from unfair and deceptive conduct.”
Starting in 2010, Payment Systems cold-called small businesses in Vermont to schedule in-person sales presentations of credit and debit card processing services and leases of processing equipment. Twenty local businesses signed up. Payment Systems’ agents told the businesses that they could achieve substantial savings by entering into processing agreements with the company and equipment leases with an affiliate. However, the savings hinged on the local businesses’ willingness to accept only “qualified”—that is, non-rewards—credit cards, something that most businesses cannot afford to do. In fact, processing rates for many of the businesses jumped from 1 percent of dollars charged to 3.79 percent, totaling almost $115,000 in higher costs for the group.
Payment Systems also advertised that its clients included well-known companies like Pizza Hut, Shell, and Home Depot, when those corporations were actually clients of a larger company whose services Payment Systems sold. In addition, Payment Systems told local business that “for today only,” it would waive certain fees, without disclosing that the fees were always waived. Finally, Payment Systems’ processing agreements did not disclose the local businesses’ right to cancel the agreements, nor did the company register with the Vermont Secretary of State, both of which the Attorney General alleged violated the Vermont Consumer Protection Act.
Under the settlement Payment Systems agreed, among other things, to:
Comply strictly with all provisions of Vermont law.
- Not make any savings claims unless those are calculated with reference to the fees to be charged for all credit cards, not just “qualified” credit cards.
- Register with the Vermont Secretary of State before making telephone calls of a commercial nature to anyone in Vermont.
- By October 1, 2014, repay its Vermont customers all amounts paid above one percent for processing, or above the contracted-for basic monthly equipment lease fee (including any lease termination fees)—a total of $169,568. Any payments returned in the mail will go to the State’s unclaimed property fund.
- Until November 1, 2014, allow its Vermont customers to cancel or renegotiate their processing agreements and equipment leases by writing to Payment Systems, Legal Department, 515 South Flower Street, Suite 1200, Los Angeles, California 90071, or by email to[email protected], and to protect the customers from any legal claims by third-party purchasers of the leases. Effective November 2, 2014, any business that has not terminated or renegotiated may begin to be charged the higher fees provided for in its original processing agreement and lease.
- Reimburse its Vermont customers for any excess payments made during the month of October 2014.
- Pay the State of Vermont $100,000.
- Source: VT AG 9.10.2014.For more information on the settlement, call the Attorney General’s Office at (802) 828-5507.