Merchant Sues Square For Unfairly Holding Funds
Richard Meldner from eSellerCafe.com has written a series about a company named Mon Ethos Pro Consulting. Mon Ethos Pro Consulting received a notice from Square that it intended to hold 30% of its sales in a 120-day reserve. Mon Ethos Pro Consulting filed a lawsuit seeking relief. While we have no independent corroboration of the truth of this story, the merchant’s filing of a lawsuit gives us enough reason to write this post. Read Meldner’s first two installments here:
How Could This Happen?
As we’ve written before many times, Square is not a traditional credit card processor. They are an aggregator, so they have many merchants sharing individual merchant accounts. Their business model also prides itself on speed and convenience when setting up a merchant account. For both of these reasons, they don’t perform the normal industry due diligence on a merchant prior to account activation. When issues arise, or Square decides to make a change, merchants have fewer rights and may ultimately be surprised by harsh treatment. Unlike traditional credit card processors, you can’t get agents on the phone within a few minutes to resolve an issue.
When Are Funds Typically Held?
There are a few reasons that cause funds to be held in a processor’s reserve account. Typically, credit card processors hold funds for 120-180 days when there is evidence of fraudulent sales. They also hold funds if there are several month delays between an initial deposit and a customer purchase, the merchant’s industry is high risk as a general rule, the merchant’s owner has a poor individual credit history, or they are unable to cover the funds for their processing fees or chargebacks.
According to the article, Mon Ethos didn’t fall into any of these categories. Furthermore, they allege that Square doesn’t even mention most of these potential scenarios as a reason to hold funds. Square assured the owner that their account was in good standing.
One final thing that grabs our attention is that it is a 30% hold. Most often, we see 10-20%. 30% is very steep.
We hope to see a positive resolution here and wish Mon Ethos the best of luck.
Don’t Tackle The Credit Card Processors Alone
Since 2009, IdealCost.com has helped hundreds of companies nationwide reduce their merchant account fees through identifying and fixing hidden profit, overcharges, fake fees, and billing errors. Clients have saved $300-$20,000 per month on their credit card processing fees without going through the hassle of changing their processing vendor, bank, or equipment. Switching credit card processors should be a last resort, only reserved for funding delays, poor customer service, or technical difficulties. Before you consider switching credit card processors, see if you qualify for IdealCost.com’s monthly savings program be uploading your most recent merchant statement for a free analysis. You’ll receive an estimate within 24 business hours.
If you are opening a new credit card processing account or must switch credit card processors due to funding delays, technical issues, or customer service problems, feel free to contact us for a free consultation. IdealCost.com can help secure the best terms and fees based on your specific needs.