Read the Fine Print
by Bob Osgoodby
We all hear the stories about how E-Commerce is the wave of the
future, and what we must do to compete. Yes, the smallest "Mom
and Pop" business can compete against the "Big Guys" and make a
respectable buck or two. As I'm sure you have, I get email
everyday about how important it is to be able to accept credit
cards on line.
And guess what - this is true. Not only should you be able to
accept credit cards, but also online checks. When a person
decides to buy, you have a very narrow window of time for them to
complete the order. If you can allow them to make their purchase
and pay for it online, you have a great chance of getting the
order. However, if they have to write a check and mail it to
you, there is a "cooling off period" and you may not get the
So we all agree that accepting credit cards is a good tactic for
an online business. To do this, you must have a merchant
account, and here is where some people get into trouble.
You receive an unsolicited email (spam) that says they will act
as your agent, and will accept credit cards and checks on your
behalf. They then go on to say they will deposit the money in
your account within two working days. If you join within the
next 48 hours, they will waive the usual $695 set up fee and give
it to you for only $39.95 - there will be no monthly fees and
they'll only charge you 1.75% of the sale - wow what a deal.
I had a call this week from someone who did just that. Now here
is what happened. He didn't read the "fine print" and when he
signed the agreement, he actually authorized them to charge his
bank account for $295 security which was non-refundable if his
account was cancelled, plus the $39.95 set up fee.
Now the plot thickens. He submitted about $1,500 in charges and
the money never showed up in his bank. In coversation with his
bank representative, he then found out about the $295 charge to
his account. He called his supposed contact at the credit card
company, found out that they were an independant sales agent, and
the $39.95 was not a set up fee, but a referral fee. When asked
about the $295 charge, his contact pleaded ignorance, told him he
would have to call the Company direct, and was given their
He called the Company, asked about the $295 fee, and was told
there was no one there at that time to answer his questions, but
they would call back. He then asked about the status of the
charges he hadn't received, and was told he would have to fax
additional information and proof of delivery of his product. He
After a few days passed, he checked with his Bank, and the money
still hadn't arrived. He again called the Credit Card Company,
was told that the information requested was never received, and
they were canceling his account, which they did. He then called
his customers and sure enough, their accounts were charged for
the amount of the merchandise he delivered.
Now - the plot sickens. He is out the $334.95 for the referral
fee and the set up fee no matter what happens. In reading the
"fine print" the company can hold his money for 180 days. Will
he get his money then? Maybe - if the company is still in
business . In the meantime, his money is most likely in an
interest bearing account, and the company will walk away with the
interest plus his $295. At the end of the waiting period, if
they pay him the charges they are withholding, the company has
acted properly as far as the law is concerned.
Sounds like small potatoes until you multiply this by several
thousand people. Now, the AG will probably not get involved if
they return the money 6 months from now - they did nothing
illegal, and they cancelled his account for cause.
Will they get a bad rep - sure - and people will stop doing
business with them. But as this article is being written, this
particular sales agent is now operating under a different name,
and spamming new suckers.
Now pay attention - First, ignore the email spams you get from
people promising to process credit cards on your behalf. They
are simply independant sales agents, and cannot bind the actual
company to anything, no matter what they promise.
Second, do a little homework - how long has the company been
around? Can you get contact information from some of their
clients who are using their service? Are these real people or
simply shills working for the company?
Third, and most important, read the fine print - better yet, have
your lawyer review the contract.
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