Who’s protecting your small business from predatory service providers?
Today’s consumers have many financial protections because of recent Consumer Financial Protection Bureau (CFPB) regulations – 53 final rules in the past four and a half years, in fact, as listed on the CFPB website. The same doesn’t apply to small businesses, however. If Boris Badenov and Natasha knock on their doors, no regulatory agency stands by ready to protect them. They also don’t have the legal resources that large companies employ. Instead, small business owners must rely on themselves for protection against obscure fines, fees and other predatory practices.
Here’s an example of what I’ve seen in the merchant acquiring business: many statements from small businesses of lists of fees and charges – so many they can’t track them and so obscure that they can’t understand without help, let alone figure out how to eliminate them. For example, I’ve heard of $50 a month for “non-compliance,” but there’s never an explanation of what that means or how one can eliminate the fine.
Ultimately, things like this are nothing more than thinly-veiled attempts by companies serving small merchants to boost their revenue – and, unfortunately, that’s commonplace. We’re all familiar with the typical ploy of offering an initial low price to persuade a customer to sign up for service. Then additional (and often unclear) fees are tacked on to compensate for the low entry price. The result is that customers pay more in the long run than if they were dealing with a vendor with higher initial, but transparent, pricing.
From my perspective, small merchants face similar challenges in dealing with service providers:
- Most small merchants are so focused on their day-to-day operations that they don’t have the time to chase vendors for explanations and remedies to unfair practices. First, it’s on them to determine where to complain and, second, they have to determine what equals a fair resolution.
- Few small merchants can afford to belong to organizations that are known for lobbying on behalf of retailers. In addition, most such groups are focused on larger businesses, not on protecting small businesses from predatory service firms.
- Local merchant associations can provide information sharing opportunities, but are typically geared toward marketing initiatives such as increasing foot traffic during seasonal shopping.
Where can a small- to mid-sized merchant find Rocky and Bullwinkle in a barrel of Boris Badenovs? The first stop should be to reach out to your community banker for counsel. Ask your banker who their partner is for merchant services. Banks can act as strong advocates for customers, and have more leverage when relationships go south. Second, depending upon their clout and vetting process, some associations offer guidance on retaining trustworthy services. Finally, I would do some research to identify companies that build transparency into their contractual agreements for their services – e.g., companies that have policies such as a merchant bill of rights as a prominent part of their communications.