Prepare For a Fight

If you read Part 1 on how to prevent getting into a bad merchant account contract, we’re now going to cover the process of canceling a merchant account that has an Early Termination Fee (ETF) — also sometimes called a “Deconversion Fee.”

Please note that the tactics below should not be construed as legal advice and that this author in no way endorses or encourages actions that may violate the law where your business is located. If you signed a contract, you may be under a legal obligation to fulfill it. If you are in a dispute with your provider regarding your fees, please consult an attorney for guidance.

Understand Your Termination Policy

If you are going out of business, Andrew Schrage, co-owner of Money Crashers Personal Finance, notes that some contracts have conditions to waive the fee under such circumstances. Be sure to reference your agreement to find any provisions that allow you to terminate service without an ETF. Keep in mind that even if you find provisions that allow you to cancel without an ETF, it doesn’t mean that a processor will automatically waive your fee. Therefore, you may want to prepare for an ETF by taking the following steps before canceling your service.

Should You Close Your Attached Checking Account?

When you signed up for your merchant account you likely granted the processor access to your checking account. Most often this is done so that your sales can be deposited from your merchant account to your checking account, but once a provider has ACH access they can also make withdrawals without prior notice.

They May Charge You Instantly

Early Termination Fees are almost always automatically debited from a merchant’s attached checking account the moment they cancel service. The only way to prevent a processor from drafting a disputed fee from you is to cancel your checking account and notify the bank that you do not authorize any further transactions from it. Keep in mind that you should pay any legitimate outstanding fees owed to the provider, such as remaining processing fees, because the processor has a legal right to collect them.

There May Be Stiff Consequences

Closing your checking account will keep a provider from electronically collecting remaining fees while you fight an ETF, but doing so can set you up for other headaches. For instance, there are countless stories from business owners about being threatened with lawsuits, credit score damage, or getting sent to collections after closing a checking account and refusing to pay an ETF. Even worse some business owners report getting placed on the Terminated Merchant File (a highly unethical tactic) which can make it impossible to get a merchant account with another provider. It’s up to you to decide if the fight is worth the risk.

Build a Case For a Free Exit

First, check your last three months’ statements to see if any of your fees have been raised. Many state laws (and many contracts) say that if your fees have been raised during your service agreement, you can cancel with no penalty for a defined grace period (usually 30-90 days).

If you recently signed up with the provider and want to cancel because you were deceived by an agent regarding the costs of the services, gather any supporting evidence that proves that you were misled about pricing or cancellation terms.

Zen and the Art of Negotiation

Lastly, prepare to be courteous. The person on the other line is a human being and is more likely to help you if you are friendly and treat them with respect. Remember, you signed a contract and may have little to no “legal” leverage.

Get Your Sale Representative or Account Manager Involved

Getting the agent who set up your account involved can solve a lot of problems. In some cases, the agent actually makes the final call on whether or not the ETF should be charged. If the agent values your relationship and has any influence in the matter, they may be able to get it waived or reimbursed for you.

If the agent can’t or won’t help you, and is an independent contractor (most are), then you may have an additional legal route for recovering your fee if you believed that he or she intentionally misled you. As an independent contractor, an agent acts as his or her own business and can be held accountable for illegal sales and marketing tactics. If you believe you have a case, you may consider taking legal action directly against the agent.

Make a Case

Most providers require written notification of cancellation. If you have documentation that proves or suggests that your ETF should be waived, submit copies along with your cancellation notice. Be sure to get confirmation that your cancellation noticed has been received. Your cancellation letter should provide an explanation of why your ETF should be waived in reference to the supporting documents.

Reverse the Fee

If a disputed ETF has already been debited from your checking account, get your bank involved. Many banks will reverse the charge if you report it as unauthorized. However, if the bank where you keep your checking has also provided your merchant account, this tactic may be fruitless. Once you have successfully reversed a fee, it’s probably a good idea to close the checking account and open a new one.

Threaten Public Complaints and Official Reports?

If a processor is refusing to waive or reimburse a disputed ETF, there are a few places that you can file complaints that will get a merchant account provider’s attention. We’ve covered these places in another article titled “How to Report Bad Credit Card Processors” so check it out after you finish this article, but before you start filing reports be sure to speak with an upper-level manager and inform them that you plan to file reports and reviews about your grievance. Be specific about where you will file complaints as it will show them that are not making empty threats. If they still refuse to work with you, start filing reports and leaving reviews. You may be surprised how quickly they change their tune when a third party gets involved.

Bottom Line

Merchant account early termination fees often seem unethical but, despite their questionable nature, they are legal in most cases. Your best chance of avoiding an ETF is to eliminate it prior to setting up an account. For those who are already stuck in this unfortunate situation, preparation and courteous attitude can make all the difference. In the event that a processor will not budge, official reports, public complaints, and renegotiation may get the job done.

Do you have a horror story regarding an ETF? Tell us about it in the comment section below!