FTC, Washington Take Action Against Payment Processor for Deceiving Small Businesses About Costs and Cancellation Terms

What happened

Small businesses also will be able to rescind processing agreements without a termination penalty under the proposed order settling the FTC and Washington’s allegations. In addition, Riverside’s 26-page electronic contract buried key information not clearly disclosed by sales agents, according to the complaint.

“Riverside and Cascade promised small businesses significant savings, but instead of saving money locked them into costly, multi-year contracts and made it very difficult to cancel,” said Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection. The FTC and Washington allege that Riverside’s sales pitches included a quote sheet that compared the costs prospective clients paid their existing payment processor with the amount they would save if they used Riverside’s services instead.

The complaint alleges that Riverside at times claimed that small businesses could save 40% to 60% by switching to Riverside. In reality, the FTC and Washington allege, small businesses who switched to Riverside typically ended up paying more than they did with their previous provider.

The quote sheet Riverside provided to potential clients failed to include various fees, such as activation fees, batch fees and fees for supposed non-compliance with data security standards or inactive processing, according to the complaint. This included information about automatic renewals for processing services after the initial three-year term; a $695 early termination fee; and the cost of leasing payment processing machines from Cascade, which locked customers into an auto-renewing contract that lasted one year longer than the processing contract. The company not only falsely promised businesses they could cancel anytime without penalty but also falsely claimed that it would switch unsatisfied businesses back to their original payment processor and pay them $500 for their “time and hassle.”