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More Transparency Needed in Processor Charges: Heartland
Lack of transparency is causing many small businesses to pay much more for processing than they realize, Robert Carr, chairman and CEO of Heartland Payment Systems, tells Mobile Marketing & Technology.
All companies accepting credit and debit cards pay a combination of fees, Carr explains. There is a two-part interchange fee, a portion of which goes to the card issuer (e.g., Wells Fargo) and a portion of which goes to the card network (Visa, MasterCard).
The processor charges an additional fee for establishing and managing the link between the business and card issuers to handle the approval and transmission of the payment.
“The interchange fees are identical for everyone,” Carr explains. So large and small merchants alike pay the same amount. However, they pay very different amounts to processors, who all have their own fee structures. Some will charge more per “ticket,” so merchants with a large number of smaller items will pay higher rates than merchants with fewer tickets with higher amounts per ticket.
According to Carr, some processors will “hide” some of their fees, calling it part of interchange when selling services to merchants. Sometimes they will charge very small fees at the beginning of the contract, and then will sharply increase them. The contract will have language enabling the processor to raise the fees, but the language is buried in the contract. Large firms know this and have the wherewithal to fully vet a contract.
Small businesses, however, don’t have this luxury. Determining what is truly interchange and what is the processor’s fee is extremely complex unless honestly specified in the contract, according to Carr.
This is the philosophy behind Heartland’s recent lawsuit filed against Mercury Payment Systems, charging the company with false advertising, unfair competition, intentional interference with contractual relations, and intentional interference with prospective economic advantage.
The suit, filed in United States District Court in the Northern District of California, San Francisco Division, alleges that Mercury is illegally competing against Heartland with deceptive trade practices. Heartland contends that Mercury is effectively misleading merchant customers by deceptively hiding its excess profits in the interchange fees charged by credit card networks and their issuing banks.
Source: http://mobilemarketingandtechnology.com/2014/02/17/more-transparency-needed-in-processor-charges-heartland/
