Payments firm pays $600,000 over claims it hid fees from small shops

A company that sold card-processing services to small businesses has agreed to pay $600,000 to settle claims that it misled them about costs. The FTC and Washington state say Riverside Payments promised savings of 40% to 60%. Businesses that switched typically ended up paying more than before.

What the government alleges

A processor is the company that handles card payments for a shop. According to the complaint, Riverside's sales quotes left out several fees. These included activation fees, batch fees and charges tied to data security compliance or inactive processing.

The complaint also says important terms were buried in a 26-page electronic agreement. Those terms included the points below.

• Automatic renewal after an initial three-year contract
• A $695 early termination fee
• Equipment leases through Cascade that ran one year longer than the processing agreement

The cancellation promise

Riverside allegedly advertised a no-risk guarantee. Customers could cancel at any time without penalty, switch back to their old processor and receive $500 for their trouble. The complaint says businesses that tried to leave faced repeated phone calls and delays. Some never got promised callbacks.

The complaint also covers how Riverside recruited sales agents. It says the company advertised earnings of $75,000 to $95,000 a year. Agents actually averaged $3,787 per year, according to the complaint.

What the settlement says

The proposed order sets a $32.1 million judgment against Riverside, Cascade and their owners, Brandon Skinner and Jason Reese. That judgment is suspended once the defendants pay $600,000, because of their alleged inability to pay more. The full amount would come due if they are found to have misrepresented their finances, the FTC said.

The companies must tell customers they can end their merchant-processing agreements during a 60-day period without early termination fees or other penalties. They also could not misrepresent costs, savings or cancellation terms. They would have to disclose key contract terms before collecting billing information, get clear consent for recurring billing and offer a straightforward way to cancel.

What to do

Business owners who take cards can use this case as a checklist before switching processors. Ask for every fee in writing, not just the headline rate. Read the length of the contract, the renewal terms and the exit fee. Check whether any equipment lease runs longer than the service.

The companies could not be reached for comment. The charges are allegations, and the order is described as proposed.