Your Rights Cancelling A Credit Card Processing Contract

There is a lot of misinformation regarding cancelling credit card processing contracts without having to pay a penalty. Below are the circumstance under which you can cancel without penalty:

  1. At the end of the term on your contract, with a maximum of 90 days notice. Contracts can be can be auto extended for a maximum of 6 months and merchants can five notice to cancel at any time during that extended period. Relevant clause in the code:
“12. Payment card network rules will require that information about merchant-acquirer agreements, including cancellation and renewal terms and conditions, will be disclosed in a way that is clear, simple and not misleading.

Merchants may provide notice of non-renewal at any point during the contract period up to ninety days prior to contract expiry.

Fixed-term contracts will not be automatically renewed for the full initial term, but may convert to automatically renewable contract extensions of no longer than six months. Merchants may provide notice of non-renewal at any point during the extension period, up to ninety days prior to the end of each term.

This element applies to both the merchant-acquirer agreement and to any related service contracts with service providers. In situations where there is a business connection between the participant and the service providers, services are considered related and as a single service package”

 

  1. If you receive notice of a rate increase you have 90 days from the receipt of the notice to cancel without penalty. This included related contract like equipment leases.
2. Payment card network rules will ensure that merchants will receive a minimum of 90 days’ notice of any fee increases or the introduction of a new fee related to any credit or debit card transactions, or a reduction in applicable interchange rates.  Payment card networks will provide at least 90 days’ notice to acquirers for rate and/or fee changes and at least 180 days’ notice for structural changes.

The notice to merchants must describe the nature of the fee change and the change must be clearly identifiable on the merchant’s subsequent monthly statement, to help merchants better understand the impact of the fee change.

Acquirers will also provide an updated fee disclosure box reflecting the impact, upon written request from the merchant, following a new fee or fee increase.

Notification is not required for fee changes made in accordance with pre-determined fee schedules, such as those based on merchant sales volume, provided that the schedules are included in the merchant’s contract.”

 

Be aware there will be lots of pushback on the lease and the lease has to have been arranged through the processor originally and make sure you mention the reason for cancelling (increase in fees per code of conduct). You should also be aware that some of the processors are giving notice well in advance of the increase, up to 6 months and the notice is often buried deep in the statements. Another point is the commissioner has clarified that the 90 days clicks in after you can calculate the cost of the changes to prevent processors from giving generic notices of a “change” then when you find out the cost it is too late to cancel.

  1. If there is a decrease in Interchange rates (processors cost) and the processor does not pass on the full savings you have the right to cancel. This is very difficult to calculate and I have yet to see one processor pass on 100% of the decreases with the exception of those on a “cost plus” pricing program. The relevant clause in the code is above note, “or a reduction in applicable interchange rates”

Credit card processing is a very competitive business and processors are constantly poaching each other’s customers. This is why there is so much push back on cancelling. False or misleading statements on what you will save if you change and what your rights are have caused major problems for many businesses. Make sure you have the right to cancel and make sure your processor agrees there will be no fees before cancelling. Do not take a salespersons word on what your rights are or that they will “take care of everything”. There are honest companies to deal with but your best defense is to educate yourself or hire a company with your best interests in mind that has the knowledge to protect your right like SmallBizAssist.

 

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