The Payments Experts Podcast
Expert payments attorneys discuss the electronic payments industry from a legal perspective.
The Payments Experts Podcast
Five Things That Give The Merchant Processing Industry a Bad Name and How To Fix It | PEP112
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Five things that give the merchant processing industry a bad name.
A payment processing statement should never feel like a magic trick, yet too many merchants get hit with fees they never truly agreed to and increases they do not notice until the bank account hurts. Christopher Dryden and Jeremy Stock of Global Legal Law Firm bring on Mitchell Reisberg from Watchdog Merchant Services (https://watchdogmerchantservices.com/) to get blunt about the real-world problems small businesses face with merchant services: equipment leases that get “edited” after the fact, POS deals that look affordable until the long-term cost shows up, and processor tactics that rely on confusion and silence.
Ever been pushed to “just sign here” on a POS or terminal lease? Hear how bad leasing tactics worked, why some still linger, and what honest payment partners do differently.
• bogus terminal lease tactics and how they damage merchant trust
• why POS leasing can make sense when terms are honest
• embedded payments and processor changes that trigger massive effective rate increases
• why merchants ignore statements and what that costs them
• practical statement review habits and simple spreadsheet-based monitoring
• why selling on price alone fails and how service reduces attrition
• AI in sales and why automated outreach often falls flat
• non-solicit confusion, residual disputes, and upstream channel risk
• zombie billing, statement messages, and the 30-day window to fight back
• arbitration clauses, liquidated damages, and auto-renewals that hit small businesses hardest
We unpack how hidden fees, statement message changes, PCI charges, and plain old rate creep can balloon a merchant’s effective rate over time, sometimes to shocking levels. Mitch explains why merchants often do not open their processing statements and how that creates the perfect conditions for “zombie billing,” where charges live on simply because nobody challenges them. We also talk about practical defense: basic statement review discipline, simple spreadsheet comparisons, and acting fast when a change hits because many contracts give only a short window to dispute or exit.
AI bots made 3,500 calls and got zero bites. That says a lot about modern sales and merchant trust. We dig into what still works, plus the contract clauses that can trap you for years.
From there, we zoom out to the systems that keep these issues alive: upstream contract terms, arbitration provisions that limit real recourse, liquidated damages that punish early termination, and auto-renewals that quietly extend bad relationships. We even get into the limits of AI for sales and operations, including why bots and automation can’t replace trust, clear communication, and someone who will actually pick up the phone and fix problems.
Your effective rate can jump from 3% to 19% without you noticing if you never open your processing statements. We talk hidden fees, “zombie billing,” and how to fight back within 30 days.
If you care about fair credit card processing fees, merchant advocacy, and payment contracts that don’t ambush small businesses, listen through and share it with someone who needs a statement reality check. Subscribe, leave a review, and tell us what fee or contract term you want us to break down next.
**Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people and events is a coincidence.**
PEP Links:
https://www.globallegallawfirm.com/podcasts/
A payments podcast of Global Legal Law Firm
Lease Tricks That Poison Trust
SPEAKER_02And I used to watch where you know reps would come in and they'd have a lease document in front of them and they'd write zero in the amount due. And they said, look, I'm just showing you this. Yeah. Zero amount due. Or they would shuffle the papers. No, no, no. Sign here. You know, it's zero. Yeah. Just sign here. And the merchant, oh, gluten. And then just put a 10 in front of that later on. No, they put sticks on the zeros. So it became a $99 lease. Yeah. And you so I got a lot of people that were talking to me about um, you know, these bogus leases and these bogus fees and um uh you know, all the all the things that gave us a bad name, you know, from the get-go. I mean, I think that for the longest time, merchant services ranked second only behind used car salesmen.
SPEAKER_04Well, it's very interesting too, because all of the guys that were like, you know, fog in a mirror for mortgage sales, you know, like mortgage brokering before the meltdown, they just migrated straight over into payment process.
SPEAKER_01Welcome to the Payments Experts Podcast. A podcast of Global Legal Law Firm. We hope you enjoyed this episode.
SPEAKER_04I met you either N-A-N-E-N-E. Yeah, what was that? It was two years ago. Is that Atlantic City?
SPEAKER_02Yeah, I have your card.
SPEAKER_04Yeah, yeah. So I I and I'm gonna call you Mitch because that's perfect. That's fine. So I met Mitch and we actually got into an interesting conversation, but it was more about kind of the inequities of uh operating in this business and some of the top-down problems that exist. And uh, you know, it's it's always interesting. One of the reasons that we go to the shows more than anything else, it's not to drum up business as much as it's it's to get feedback of what's happening, right? I mean, and and that's a great place to get feedback because you got everybody who's out there doing sales all the time, and and then you know you can get their perspective of what's happening, like you know, and uh on the ground, you know, of what of what could
Meet Mitch And The Watchdog Mission
SPEAKER_04be going on. But before we jump in into all of that, like, you know, I always want to give the audience a little bit of background. So uh Mitch has Watchdog Merchant Services, and that's located in New York. And uh, but how'd you get into payments?
SPEAKER_02Um, I I had been in the uh the office products business for years and years and years, and somebody came to me one day and said, you know, you should try this, you know, that you can make a lot of money. Um, you know, and I'm looking at them like they were crazy because, you know, it's it's always been about commission only. You know, and at that point in my life, three kids. Even in the office products business? No, well, uh no, salary, but the I'm talking about processing. Yeah. The way they were explaining it to me was, you know, it's a commission only job. And I'm like, oh, you know, I don't know if I want to do that. I mean, I got kids, I got college coming up, I got a mortgage, you know, you got all these things. And, you know, they worked on it, they worked on it, they worked on it, and you know, I finally jumped off the curb and said, okay, I'll try it. Um, and you know, I went to work. Well, originally I went to work for a company out of Texas. I don't, I don't even remember their name. And it was one of those companies where they charged you uh a fee to get all the all the things that you needed, and they were gonna teach you all this stuff.
SPEAKER_04Yeah. Which kind of like business in a box sort of thing. Yeah, something like that.
SPEAKER_02Almost like a franchise or and then I opened up an account and they were like stealing money from the merchant. So I ended up uh aligning myself uh with a uh small ISO out of Chantilly, Virginia. I went to work for him on a Monday, a week of training. And by Wednesday, I was like, you know, I can't, I can I can't sit through this. Let me go out and sell something. And I went out and uh on Thursday I came back with a couple of deals. My first check was $8,900.
SPEAKER_04I said, I could do this. Yeah, for sure.
SPEAKER_02You know, so you know, that part of it was good. Um, but you know, Watchdog uh came a few years after that um as a vehicle to do advocacy work.
SPEAKER_04So yeah, uh what year did Watchdog come around?
The Smash And Grab Leasing Era
SPEAKER_02Watch, let's see, what are we in 2026? So 2010. Um 2010 it came because you know, uh a lot of people, you know, there were bogus leases. We were just talking about leases.
SPEAKER_04There were I called that the smash and grab model. Yeah. Like heavy leasing on the front end, selling them off.
SPEAKER_02Well, but you know, and and in some cases, the the the those leases, you know. I mean, I used to watch where, you know, reps would come in and they'd have a lease document in front of them and they'd write zero in the amount due. And they said, look, I'm just showing you this. Yeah. Zero amount due. Or they would shuffle the papers. No, no, no. Sign here. You know, yeah, yeah. It's zero. Yeah. Just sign here. And the merchant, oh, good, nope. And then just put a 10 in front of that later on. No, they put sticks on the zeros. So it became a $99 lease. Yeah. And you so I got a lot of people that were talking to me about um, you know, these bogus leases and these bogus fees and um uh, you know, all the all the things that uh gave us a bad name, you know, from the get-go. I mean, I think that for the longest time, merchant services ranked second only behind used car salesmen.
SPEAKER_04You know, well, it's very interesting too, because all of the guys that were like, you know, fog in a mirror for mortgage sales, you know, like mortgage brokering before the meltdown, right? They just migrated straight over into payment process.
SPEAKER_02So, you know, and it's interesting, you know, we talked about the trade shows, the NEAA. Um, you know, I've been going to NEAA for a long time. And it seems to me that the the bad players aren't there anymore.
SPEAKER_04Well, I think that's in the industry altogether, right? I mean, you know, the crazy thing about leasing to me was that for a long time, like uh leasing terminals didn't make any sense the way that they were leased. But now today, with the sophistication of what the business enterprise software tools are, right, and the and you know, and how the POS is now becoming kind of a hub for more than just payment processing and in small business operations, it to me, like leasing makes sense all of a sudden, because if you've got to get a bunch of POS systems, you know, for for your for your business, it seems to me it's much more difficult to maybe come up with the out-of-pocket if it would be like $20,000, $25,000, right?
SPEAKER_02Well, first of all, POS is a different breed of animal. I mean, those, those I I understand uh the concept behind leasing. There are a couple of um companies out there um that will spend the money and pay for the POS. Um, you know, I mean, I had one of them that did a $145,000 deal, um, you know, which is fine because I'm not laying out the money. Yeah, I mean, I just won't do it. But, you know, there are and there are good reputable lease companies.
SPEAKER_04Yeah. I mean, I was saying, like Brad Oliver, in addition to being the second client of the firm, uh Azura leasing, yeah, he's he's a good friend. And Brad, for years, because we've talked about leasing, and you know, he's he's one of these guys that will he'll come out of pocket $100,000 and do the lease, and he's got partners that'll fund. And you know, he's one of these guys that just wants to do good business. That's all he cares about, right?
SPEAKER_02Yeah, which is a nice thing. But there are other companies out there that, you know, they want your firstborn, you know, and and they're they have the only thing that they care about is how much money they can put in their pocket. Yeah. And, you know, that like there was a point in time where all of the lease companies put caps on equipment. Yeah. You know, if you if you sell $3,750, you can only get $49. Yeah. So what they would do is all of a sudden I'm looking at three, $400 leases, and then the merchant would say to me, but here, look under the counter, they sent me five advantage.
SPEAKER_04Five replacement. Yeah, five replacement.
SPEAKER_02In case anything goes wrong. You know, yeah, this is before your foray into the industry.
SPEAKER_04This is what they call the smash and grab era, like the way that they were doing it. And this was before we had like DockySign. This is before like you had a lot more face-to-face sales. There were a bunch of stuff going on that just to me, you had more unsavory practices. And like you said, that is a less in the marketplace these days.
SPEAKER_02It is. And and I, you know, part of the reason I think uh I believe anyway, is because we've spent a lot of time educating merchants. Yeah. You know, so now the merchants, you know, you can't pull it over their eyes so fast because they they have a, if nothing else, a broad understanding of what's going
Hidden Fees And Rate Creep Stories
SPEAKER_02on. And, you know, even still, some of the processors, you know, they they they do it in the way they hide their fees.
SPEAKER_04Oh, the statement messages. Look, I uh it's I I mean, I could give you a number of things that we see. Um, had a lady out of doctor uh um did kind of alternative medicine out of Reno, and she had an in uh a software that she used with embedded payment in it, and it was Cutter and or Merchant Warehouse.
SPEAKER_03Right.
SPEAKER_04And then Merchant Warehouse sold. Right. And then all of a sudden global payment, they rebranded, but global payments is behind it. Yep. And from the sale, and she, you know, she didn't look at her statements, you know, she kind of trusted the software company that she worked with.
SPEAKER_03Yep.
SPEAKER_04And she came to me, and over time her effective rate went from 3% to 19%. Yeah. Oh, yeah. I mean, it was like crazy. The numbers were crazy.
SPEAKER_03Yeah.
SPEAKER_04And, you know, there were multiple times where and it and I don't know if this is just systemic or if it's driven by the ISO that's in charge that's under global payments or or whatever it is. I don't really know. But to me, what I was seeing was just this gouging of merchants. I mean, you can ask Jeremy. We do like so when we started the podcast, we've always been focused on ISO and agent, right? That was always sort of where we were. And then COVID came along and kind of repurposed what we do because so many merchants were being affected by the change in commerce from going card present to at a distance quite a bit. Right. And then you had all of these inequitable results that were kind of unintended. And so the next thing you know, we've got all of these merchants that are coming out of the woodwork going, how do I deal with this? How do I deal with this? And as you know, customer service wasn't always great. And so now, like, I'm glad that you're here because some of the stuff that we're gonna talk about, I've wanted uh this podcast to get just as much merchant-centric because the merchants are the ones that ultimately are sitting at the bottom of the hill.
SPEAKER_02Yeah, well, you know, the the um the the sheet that Whitney sent me that says you get the last word, what is your takeaway? I mean, I'm gonna give that to you now. Great. I I I mean, I I honestly believe that if you take care of the merchant, we as as as ISOs and agents, if you take care of the merchant, everything else will take care of itself. Yeah. You'll make money, you'll, you'll, your attrition rates will go down. I mean, you know, uh, watchdog's attrition rate in 2024 was less than 1%. I, you know, and and you know, I've had uh, you know, acquirers come to me and say, give us all, give us all your business. And uh, you know, let us do your customer service. And I said, Why? My phone doesn't ring. Well, what do you mean your phone doesn't ring? We do it right.
SPEAKER_04Yeah.
SPEAKER_02You know, and and I've had a lot of merchants with me for over 20 years. You know, and you know, I've moved a couple of times, and the question was always, not where are you going, it's where are we going. You know, and and you know, that's I I think that, you know, I I've been reading a lot of stuff on LinkedIn, and you know, there's a a lot of um new new ISOs that are forming, you know, and they're they're they buy this into the well, you know, you should do this. And you, you know, all the stuff that you read on the on LinkedIn and these different people that are selling sales processes.
SPEAKER_04Well, it's interesting. I got a a text the other day, because I'm on I'm probably on so many lists, who knows? But I got a text, came through to my cell phone, and I was like, Well, what is this? You know, and I and and it was and I knew it was for a a podcast. And you know, I know with our podcast, we've actually tried to find uh synergy with a couple other podcasters, and sometimes yes, sometimes no. But the I didn't know if it was them like sending me their podcast link, and it wasn't, and I and I it's escaping me off the top of my head exactly who oh, Pay Protect. Payprotect was having a did you get that?
SPEAKER_01No, I didn't.
SPEAKER_04Payprotect was having a podcast for its salespeople, almost like a lunch type thing, where in while they're eating lunch or whatever they're doing, they're listening to where's your next merchant coming from? And they're giving sales training through kind of like a podcast format, uh, which I thought was interesting. Smart. But but they're they're doing the the kind of the the same thing. And it's like, well, where's your next merchant coming from? Right. And and I see the same thing that you got a lot of people that are out there trying to do sales like spatially rather than one-on-one. Right.
SPEAKER_02You know, I mean, you know, I've got people who said, you know, go out and hire a uh an appointment setting company. I go, why? Why don't you get your rear end out on the street and start pulling doorknobs? Yeah. You know, I mean, that's the way I grew up in this business. I was pulling a hundred, hundred and fifty doors a day, you know, and then one day out of the week, I'd I would take all of that. I'd sit down at the because I originally was in Washington, D.C., I'd sit down at the Mayflower Hotel upstairs on the second level. They gave you a free phone, and I'd sit there and dial for dollars. You know, today it's like they want you to give it to them.
SPEAKER_04Well, I I I think that that is uh it's funny. We talk about AI a lot, and we try to use AI in our firm. Excuse me, AI is like very incomplete at this point. Then what then what people think it is or what its capability is, right? The possibility of it's incredible. Yeah, but and even what it can do today is is pretty fantastic. But there's a lot of people out there that are looking at AI as like this um this tool where they can stop having to think or having to work or having to put effort forward. And you know, as far as I'm concerned, I love that. Like I love that because there we had a client come in. Check this out. I mean, this is kind of off topic, but I'm gonna give it to you. We had a client come in, this guy's sophisticated, and he's a really good sales guy. Similar to like you, he's he the way he does it is more of an old school framework and really focused on what merchants am I hitting, how am I treating them, how am I forming the relationship, how am I servicing that relationship. So he won he wants to go and and start to take risk on his go forward book. So he came in and he spent, and I don't know what AI engine he used, but he spent 35 to 50 hours on creating a wholesale uh mer like a merchant agreement where he he, you know, he was ultimately taking risks, but it it was it was something that when we went back to him and we were like, look, here's where all the the gaps are, and we could have done this in five hours. Right? Like, and and the and the realistically, he would have caused if he had if he had taken that and put it into operation, he would have caused himself so many problems because of the gaps that unwittingly, and look, this guy's smart, but unwittingly, like he wouldn't have known necessarily because he's not like the one thing that's very different about us is that we litigate our contracts. Right. I mean, I said to uh opposing counsel in a contract negotiation last week, I said, you know what? You know, if I'm negotiating an agreement and we ended up in a dispute, and then I represent our client in the litigation and we lose, what's that say about me? Right, right? Like so, so you know, we may be at some deal breakers here, who knows, right?
SPEAKER_02Well, we, you know, uh AI, I thought that I would be, you know, get with the times and um hired a database administrator, and we built a bot to make appointments. And she was you couldn't tell she was a bot. She had all the right rebuttals, you know, she could speak seven different languages. But at the end of the day, she made 30 that we started running her 3,500 calls. We didn't get one byte. Not one.
SPEAKER_04Did you get the disconnect of what it was?
SPEAKER_02Well, we couldn't, I couldn't figure it out. I mean, you know, a lot of merchants, you know, I mean, they've been through all this before. They get, you know, seven to ten calls a week. Yeah, you know, and they just don't want to hear it. They're numb to it. Yeah. So that's, you know, so I finally said to my guys, I said, we're gonna retire her. If you want leads, go out and get them.
SPEAKER_04Yeah, totally. Go out and get them. Well, look, man, I think people are yearning for face-to-face to a certain degree. I mean, it it like you coming in here, but I I don't mind doing the podcast at a distance because you know, we did one last week with a guy that we're we're friendly with, and it was awesome, right? He's sitting in his backyard in Texas. I'm here, but it's much better to have somebody like sitting here with me. Yeah, yeah, yeah. Yeah. Well, look, I mean, one of the reasons that we wanted you to come on was because you were, and again, trying to make this more merchant-centric, yes. You know, you're a wealth of knowledge when it comes to how are the merchants getting shorted. You know, like like what are what are the common ailments that you hear, you know, uh day after day. And so we wanted to take some time to press on those. You know,
Why Merchants Skip Their Statements
SPEAKER_04go ahead.
SPEAKER_02One of the biggest things I think that they're getting shorted with is like if you walk into a merchant and you say, okay, let me take a look at things, show me a statement. They hand you a stack of envelopes that have never been opened. Yeah. And I said, You you can't do that. You know, you got to look at them at least. But you know, what they're doing is they look at their bank statement and you know, then they call and they they complain, you know, I I $700 more came out of my bank account this month. What's going on? Well, maybe that has something to do with the fact that your volume was up by about $15,000. You know, but you got to look at the statement, you know, and they're not doing that. Um, so part of it is the fact that they don't, they don't have, I don't necessarily that they don't have the time, but they're looking in a place that they shouldn't be looking, and they're not looking at the right things. You know, but like with my my portfolio and the people that I deal with, I go over, I mean, literally every single month, I'll go over six, seven hundred statements. You know, and I, you know, you get to the point where you can do those pretty quick. You can see what's going on.
SPEAKER_04Well, I see AI tools coming out for for statements, you know, to actually at least make them digestible and translatable so that a common person can understand.
SPEAKER_02I put them in an Excel spreadsheet.
SPEAKER_04Okay.
SPEAKER_02You know, I put the number in, it does all the calculations. I mean, I've, you know, it took me a while to build the spreadsheet. But, you know, so now when I send it to the customer, you know, this is what you did this month versus last month, this is what you did this month versus the same time last year, you know. So, and they all appreciate that information, but more importantly, forgetting about all that, what they really appreciate is that they know that I'm taking care of them or I'm looking out for them.
SPEAKER_00Yeah.
SPEAKER_02And that's the biggest thing, you know. If you have merchants that don't trust you, you're not gonna last long with them. Or if you have merchants that you sold your service to them based on price, you won't have them long.
SPEAKER_03Yeah.
SPEAKER_02You know, we used to talk about the the $99 pencil. You know, that was one of the things that I used to teach. That, you know, here's a pencil, I'm gonna sell it to you for $99, and here's why I'm gonna sell it to you, and here's why you need to buy this pencil. You know, and if you can explain it to them in a way that they understand, they're they're good with that.
SPEAKER_04I saw this thing, it was called the red paper clip or something, and it was related to the real estate industry. This is coming up on probably almost 20 years ago, and it was about exchanges where people were exchanging items for value of value from a red paper clip all the way up to a house where they did a series of exchanges that started with a red paper clip and went to like a house or something like that. And it was really interesting. I and and there's a documentary on it. It was uh really short, like short, short film, but it was kind of cool. But but rolling rolling into some of the things that you see, besides the fact that I mean this is uh to me, this is kind of an important one. How do we make it easier for the merchant to be aware of or let me I'll back that up. Why are the merchants not opening the mail?
SPEAKER_02Um well one, because I think that they believe that if they open up and look at a statement, it's Greek to them. They don't know. I mean, if you look at You know, uh, some of these statements, uh, you know, you need an engineering degree to decipher them. I mean, there's stuff, you know, all over the place, and it's even hard with some of them just to calculate an effective rate.
SPEAKER_04But if but if I've got a low profit margin and I see 20% of my profit margin being taken out of my account monthly for so like am I not gonna take an interest?
SPEAKER_02No, you may you'll take an interest, but you may not, I mean, if it's you know, where you have somebody that you said that you know used to have an effective rate of three and now it's 19. I mean, I've seen plenty of that. And again, educating the merchant, they're a little more aware of it. But, you know, if things that are coming out on other companies' statements like security fees or, you know, stuff that and and they bury them in the statement. Oh, yeah, for sure. You know, so they don't know what they're looking at. I mean, what we do is we take a statement and we'll analyze it, and then I give them a breakout of here's what you were paying, here's what you're paying now, here's what went up, you know, and and and the other thing that's always been hard, and it's hard for for uh uh ISOs and agents is to decipher where all the padding is.
SPEAKER_03Yeah.
SPEAKER_02I mean, that's a big one.
SPEAKER_03Yeah.
SPEAKER_02And because I mean, I'll tell you that most of the people that I've encountered in this business couldn't analyze a statement to save their life. You know, and they always look at one thing, they'll look at the the the the debit, uh the interchange debit, which is you know five cent five basis points and twenty-five cents. But that's all they know. So they don't know what's being buried in, you know, this corporate card or or this grocery card, or they because they don't know.
SPEAKER_00Yeah.
SPEAKER_02And unless they walk around with an 85-page interchange report. Um, you know, we, you know, and they're there are good people, you know. Um Ian is very good if you know Ian Crashum. He's very good at that. Uh, you know, you send him a statement, he'll break it all out and he'll tell you what's padded and what's not. Um so it makes it a little easier for us to deal with. But then what he does with that is Yeah, what's the name of his company?
SPEAKER_04I think I do know who that is.
SPEAKER_02Um I don't know, I use them too.
SPEAKER_04No, they would they would they're at the shows. Their proposition was we're we get paid off your savings. We take a percentage of your savings.
SPEAKER_02No, that's not that's not there's and then there's you know, there's um Mr. Shepard, who which I've I've I used to use him, and I've gotten away from that because he's now I mean he's got his own ISO, he's developing this, he's developing that. And you know, I inherently, because I've been doing this so long, I don't trust people that I'm giving them all my data. All of your data. Yeah. I don't, you know, I mean, if you're gonna turn around and sell to a merchant, and there's there's now, I mean, I found one that um um whose whose uh name uh directionally, well, south, east, whatever, um they've started doing that.
SPEAKER_04Um Well, look, I mean I I I won't say them because I don't want to end up one, I think I'm gonna sue them, so I don't want to give away the element of surprise. And number, no, no, and number two, um I I I don't I don't want a cease and desist letter, but there is an ISO in the Midwest who is rather large, who I have from their agents, multiple agents, written statements from their internal people that say we are no longer reviewing or no, we are no longer uh overseeing or monitoring our internal sales reps and whether or not they are bumping into your merchants for the agents. And to me, that just screamed. Yeah, we're just giving our internal sub sales reps your all the information to convert the house account, convert everything to house accounts.
SPEAKER_02And that was the conversation I started with you when I met you two years ago was talking about getting a Nastigram because I threatened to move one account because they wouldn't handle it. And they said, Well, we'll just not pay your residuals. And I'm like, you know, because that that that but you know, um apparently they're not really paying that much attention anymore.
SPEAKER_04But that and unfortunately, well,
Old School Selling Versus AI
SPEAKER_04it's interesting. So I I've got a we do all we do all sorts of work, right? I mean, we do transactions, contract drafting. I mean, they a ton in in addition to litigation. And it is interesting the amount of our clients that I talk to that confuse exclusivity and non-solicit. Like, you know, like, look, well, my agent's non-exclusive. So if they bring me a merchant, then they can just take a merchant.
SPEAKER_03Right.
SPEAKER_04Right. And they like to give their agents that flexibility, but I say to them, like, that actually puts you in violation of your upstream agreement. And some of them will say, well, they're not paying attention to any of it, or they know and they let me freely do it. Right. So, and but that's great when times are good. Right. But when times are bad, that's a violation of the writing. Right. And, you know, there's no waiver of that.
SPEAKER_02It's that that non-solicitation thing. I I mean, I've the I have a gentleman that works for me. Um, and he had a problem where, you know, he left. They sent him the cease, they sent him a cease and desist before he even did anything. Yeah.
SPEAKER_04Um but or some sort of letter that says, Here are all your surviving obligations, sign this and send it back. Well, which he never did.
SPEAKER_02But what they said to him is, you cannot contact your merchants. So what these idiots did was they contacted all his merchants and said, He's no longer here. Well, what that precipitated was they all called him. They all called him.
SPEAKER_04Yeah, totally.
SPEAKER_02And and he moved, you know, anybody that called him, he wrote it down, date, time, and moved him. And that was the last we ever heard of that one.
SPEAKER_04Yeah, it's interesting the way that the non-solicit provisions have been drafted. I mean, there's there's a lot going on in that front legislatively. Yeah, I mean, Washington has passed a restrictive covenant law, which basically not equalizes but gets pretty close a non-solicit to a non-compete.
SPEAKER_03Right.
SPEAKER_04And the non-solicit has to be very, very uh like neatly tailored to be that person's experience with these customers from the employer, and it expenses provides protections to independent contractors, and it doesn't make an extinct distinction in independent contractor of whether it's a corporation or a person. It's really interesting.
SPEAKER_02Well, you know, that small ISO that I started with in Chantilly, Virginia, when I finally left him and I started moving, and I I mean, I I had no qualms in saying they're mine, I'm moving them. Um, you know, um, first thing he did was take me to court. He lost. Second thing he did was he had some henchman attorneys that swore out a warrant for me and said I stole an ATM machine. So he did that in Virginia. Um state police came to me in Maryland and locked me up, and then they had to extradite me back to Virginia. I spent six days in Maryland jail, and when I got to Virginia, I spent 45 minutes because the judge said, go home, just show up in court. But, you know, and then when I walked into court, even the judge said, What did he do? Put it on his back and run out the building with it? Um, uh, you know.
SPEAKER_04Is there any recourse for you by being falsely accused and charged?
SPEAKER_02As my attorney says, you know, I mean, I learned this early on in my in my business life. Sometimes you have to know if the juice is worth the squeeze. Yeah. And he said, you know, I had to spend $15,000 for a criminal attorney that we were in court for 20 minutes before it was.
SPEAKER_04No, no, no, I get it. Like it's stuff like that makes my blood boil. Yeah.
SPEAKER_02And I could have sued this guy. Um, but you know, my attorney says you're gonna spend 40 grand to what get what, 20?
SPEAKER_04Yeah.
SPEAKER_02You know, so I I just let it go.
SPEAKER_04That's the first conversation I have with everybody on litigation is what's the amount at issue?
SPEAKER_02Right.
SPEAKER_04And then once we get past that one, and then he sued me again. How valuable is your time? Right. You know, like, yeah, yeah. Yeah. I mean, it's it, you know, you do like you got to be geared up and and and ready for it.
SPEAKER_02So and this was a guy that when he sold his he sold the ISO um and promised all the reps, you know, part of that. Yeah, he took the money and ran so fast it wasn't even funny. Nobody got a dime.
SPEAKER_04Yeah, the phantom stock plan.
SPEAKER_02Yeah. So uh, you know.
SPEAKER_04So so, but on on on related to merchants, because I want to kind of stay in in that realm as much as possible. So to give an idea of, and I say this just as much for merchants as it is for anybody else, but you know, one of the terms that you gave to Jeremy was zombie billing. Yeah, like and and I and I I see a lot of it, right? But for our viewers, like explain what zombie billing is and how you might be able to combat it.
SPEAKER_02Well, zombie billing is one of those things where if, well, one, if you're not paying attention and you're sleeping, um, there's things that'll show up on your statement and you're not exactly sure, you know, where it's buried. I mean, we find it pretty easy, but what we find is the attitude of the the um the processors. If they call and complain, we'll give it back. If they don't call and complain, we ain't giving nothing back. That's right. Speaking wheel. Yeah. Yeah. Yeah.
SPEAKER_04That well, dude, that's how they do it. So they actually figure out how much money we can make. We put out a statement message. If anybody complains, we'll give them the money back. And after 30 days, you're stuck as a merchant under the contract, so you're screwed.
SPEAKER_02Right. I mean, we're we're very, very diligent, diligent about looking at at where these rates are being raised and getting people, I mean, because we know we have 30 days. You know, this is not what I signed on for. You know, we're going to consider our contract null and void. We've never been pushed on that. Nobody's ever come back. Well, wait a minute, you can't do that. You know, when when we take a merchant and we move them and we say, you know, and and and we'll put it out there, you raise their rates, it's not what they signed up for, you're done. Nobody complained. I mean, I'm not, I I'm I I haven't been sued. So I, you know.
SPEAKER_04No, because it's not like it's not worth the juices and worth the squeeze. Like it doesn't make if it's mass migration of merchants based on you know something understandable from the upstream vendor, but it on the one-offs, they're never gonna press you.
SPEAKER_02Well, and that's kind of what you know, people that I talk to, and I talked to a lot of ISOs, I said, don't do it all at once. Take it nice and slow and easy, you know, and and um uh you know, a lot of a lot of uh these um processors are not looking at you know who who's down, who's up. They don't they they don't look. So if you move a merchant and they disappear, they don't know. And they're not paying attention to it. So, you know, that that in and of itself is because I think that, you know, they're looking at a million and one other. I think what they really are looking at is, you know, they they sit around in a room with no windows, you know, in the dark and figure out how can we take more money from our merchants.
Contract Traps And Legal Pressure Tactics
SPEAKER_04See, I'm always thinking that they're they're always looking at new sales. And the only time that they go and look at the existing merchant base is when they have to hit an earnings gap. You know, like it, you know, where new sales is is not is not happening.
SPEAKER_02I see, I don't think it's it's I don't think that's what they look at when they have to hit an earnings, you know, they they've got to reach out for their shareholders. Yeah. Because I think all they do is they go, okay, in order for us to make everybody happy, this is how much money we need to make. Based on our entire portfolio, what do we have to create as a fee to raise that money? Exactly. And that's what they do.
SPEAKER_04Yeah, with a reported rate where we have to give it back of what percentage.
SPEAKER_02You know, and I've been watching this for all these years. I mean, when when I when I started out and I was with this ISO, you know, my phone would ring a hundred times a day because people were calling and going, the hell happened? All of a sudden, this stuff was jacked up through the roof. And that's because the owner of the company would sit at home on his computer and push a button.
SPEAKER_04Well, you know, it's interesting because um, you know, if you did have a legal dispute, the arbitration provision generally it it bars you from having a class or being a representative of a class action. And then in addition to that, if you try to negotiate the terms of the agreement, then generally speaking, they don't move on anything and it's just take it or leave it, but yet somehow it's not an adhesion contract. And you know, and and so no, no, no. It's interesting because we had a I've been saying this for years. I would love to challenge more merchant processing agreement terms, including the arbitration provision. Because if I try to bargain and you tell me no across the board, including the arbitration provision, we had a judge here in Orange County rule on our side that we could get rid of the arbitration provision. And it's on appeal now and it's stayed, but we'll see what happens with it. But because what she said was that in this day and age, in the time of being able to electronically form a contract, it is so easy in DocuSign for you just to put something next to very key provisions like arbitration, where you're forfeiting some of your constitutional rights because you can't do certain things, to just have a little button where you click and put your initials next to it.
SPEAKER_03Right.
SPEAKER_04And she kind of read into it. I think we're gonna get overturned on it, but I find it really interesting these in this day and age that nobody ever comes to us. And look, some of these merchants have huge bargaining power because some of the larger mega merchants, oh yeah, they should be able to bargain. Right. Nobody's doing it. And uh, we've even done webinars to try to get other business attorneys like, hey, if you have big clients, bring them over. They're they're paying a heavy percentage of their revenue to this that you guys should know about it, right? And uh so what other contract terms do you see that are problematic? Because to me, I the arbitration provisions, one, because it minimizes anybody's ability to like actually have, you know, like a cooperative effect with everybody else that's equally impacted.
SPEAKER_02Liquidated damages, that would be another one. Um you know, we we've we've seen where companies will go after a small merchant for like tens of thousands of dollars because they just, you know, three months into it, they didn't like what was going on. Well, now they're on the hook for an extra 45 months times whatever you know these companies come up with. I, you know, we're we're not a I don't do I don't do contracts, I don't tie anybody in. I always tell people if we don't do what we say we're gonna do, go leave, kick us to the curb. Um you know, uh the I I mean, I have a a friend of mine out of Philadelphia who works for a law firm, and his joy in life is suing processors. And he's pretty much sued them all. Um and they seem to win wherever they go. You know, uh you know, um class actions where you know uh we had a bunch of salad houses in Philadelphia, and they found that their rates were going up. So these guys all got together and formed a class action, and you know, they went and sued and they won. Uh unfortunately, in the middle of all that, the owner of the company died. So um, but you know, so that's one issue. Um, these long-term, you know, the auto-renewals on contracts, like, okay, you've got a four-year deal, and we're not gonna say anything to you, but you know, in the 49-month, you've just renewed for another four years. And we find that to be a little, you know, because most merchants, you know, they can't even tell you what they had for breakfast yesterday.
SPEAKER_04You know, states have passed legislation. California passed legislation on auto renewal. I mean, it's got to be like conspic, like very conspicuous, can't be for some huge extended period of time. I don't even know if it could be for greater than a year. Yeah, I haven't looked at it recently, but our state generally has that.
SPEAKER_02New York is not like that.
SPEAKER_01No, like New York's a messed up state in a lot of regards. Is that one of those provisions, Chris, to your experience, that can be negotiated or typically cannot be negotiated?
SPEAKER_04Sure. But I mean, I don't see a lot that have like you know, four-year with four-year. I will say TSI's global payment agreement for registered ISOs or FSPs, they have an eight-year term. And I was kind of blown away when I first saw it with a two-year uh renewal. But most people that are getting into that type of relationship, they're like, they're not really looking to hop around. And usually it's not exclusive.
SPEAKER_02So, you know, the thing with TSUs though, I mean I'm I'm a I have a direct pipe with TSUs, and you know, their contracts that they write now are all about tra they're transactional. You know, you got to do so many transactions in a year.
SPEAKER_04Yeah, they all have minimums associated with them.
SPEAKER_02Not mine.
SPEAKER_04Yeah.
SPEAKER_02You know, which is good. And the other thing that I have in my contract, and I don't know why I was smart enough to ask for this, but they can't raise pricing to my customers without my approval.
SPEAKER_04Because you asked for it. I did. Most people don't most people don't talk about pricing controls. Yeah, I mean, that's one of those things where like a lot of agents don't understand. When you broker somebody else's agreement, you're not a party to it.
SPEAKER_03Right.
SPEAKER_04So if you're if you're then letting somebody else get in or out or facilitating them getting in or out, you're interfering with it. And so a lot of times it's not your agreement. Like so many agents say this is my merchant, but the agreement is actually with a whole bunch of other people in the merchant or the sponsor bank and thesis. And so they can do what they want under the terms of that agreement.
SPEAKER_02Yeah. The other thing that I think we find a lot is that there are um still a tremendous amount of people who lie, cheat, and steal to make a living. Um, I'll give you a perfect example. I have I had a merchant, he left, and I was trying to help the guy out. And he said, Well, but you you've been stealing all this money from me. And I'm like, What are you talking about? He says, Yeah, you've been taking every money from me, you know, for years. And I've come to find out that it was another ISO. So I call the ISO up, who I know, and I said, Look, can you help me out here? Because you're holding up money that he owes me. I he said, Well, I'm gonna have to go back and talk to the agent. I said, What for? You haven't processed a dime with this guy in four years. He's just paying minimums, paying minimums and sometimes PCIs and all the other garbage that goes with it. And then they ghosted me. So I'm like, well, okay, ghost me, you know, but you you you may feel the repercussions from that. I mean, it's not like this is my first rodeo. Um, you know, so there's a lot of that, you know, that's going on. There's um uh, you know, there's a company out there that is now they've gotten into uh and they're primarily POS, um, but now they're they're um gonna have uh ISO agent channel where they didn't have that before. Um and these guys are going in lying through their teeth. I mean, it's like you know, 1995 all over again. Yeah. Oh well, if you get sued, we'll protect you. Um if um you get a charge back, you won't have to pay it. Like, where are you coming from with this? Wow. And you know, because they they've I mean they've got a big footprint in the in the marketplace. So people are having a tendency to believe them. And you know, I mean, then they're gonna get they'll get burnt, you know, and then there's nothing that you can do with them because they've been compromised, they're in a contract, because some of these companies still hold them to three, four, and five. I've seen five-year contracts, which, you know, I mean, I'm just much happier not not dealing with a contract. And people feel better about that. I'm not gonna hold you. If you don't like us, go. You know, um, you know, so that's another one of those things. Things the other thing that they they do is they don't read the fine print in whatever quote they get. Here's your rates, but somewhere in there it says for 60 days or 90 days or whatever. And then after that, stuff goes through the roof.
SPEAKER_00Yeah.
SPEAKER_02You know, so people are always, you know, crying and fighting about that.
SPEAKER_04Um, you know, and and but I feel like the source these days to like make the point that you were making earlier about when you're at NEAA and who's attending, I think that all that stuff starts upstream more than it starts downstream these days, right? Like it does. Yeah, I I I I think some of the practices that you're talking about, they're they're they still exist, but they're not as prevalent. But I think a lot of the stuff that is happening is is really happening from these systematic things that are going on upstream.
Final Takeaways And Closing
SPEAKER_01Thank you for listening to this episode of the Payments Experts Podcast, a podcast of Global Legal Law Firm. Visit us online today at Global Legal Law Firm dot com. Matters discussed are all opinions that do not constitute legal advice. All events are likeness to real people, and events is a coincidence.