Q: If you could change two immediate things in the credit processing industry in Canada, what would it be?
Well, that list is long, but if I had to pick just two, it would be eradicating terminal leases and liquidated damages.
Q: Can you expand on that?
When you lease a car, your leasing it at its true value. In our industry, when you lease a terminal you’re leasing it for 10 to 20 times it’s value, allowing the processor and their agent to make a huge commission. The average terminal lease is around 40 dollars for a 60 month term totaling around 2400 dollars. What most merchants aren’t aware of, is that the terminal usually costs around 250 dollars. The end result being that the uneducated and unsuspecting merchant has just committed themselves to an iron clad, potentially credit score destroying agreement just so their processor can pocket thousands of dollars upfront on something that’s worth a few hundred dollars. That’s like leasing a KIA, and paying 200k for it, with the car salesman pocketing the difference. Now that merchant, once they realize it, is stuck with paying off this cash grab for the next three to five years or even longer.
Q: Are there any other pitfalls to leasing a terminal?
Yes, again, too many to count. The most notable is that even though you technically own the terminal, you can’t use it with any other provider. In essence, you have paid thousands of dollars for an oversized paper weight.
Q: Can you think of any advantages to leasing?
Q: Can you explain liquidated damages?
It’s another potentially debilitating and expense cash grab used by processors. Instead of charging a straight forward cancel fee of say 300 dollars, the processor takes the remaining months left on the Merchant’s contract and multiplies that by the average monthly profit they are earning from that account to calculate the cancel fee. This could potentially mean thousands dollars.