dax702 — 2010-02-09T13:32:22-05:00 — #1
I copied and pasted this from the terms and conditions of what I thought was one of the best merchant account providers:
B. Reserve Account.
i. Establishment. You will establish and maintain a non-interest bearing deposit account (“Reserve Account”) at Bank initially or at any time in the future
as requested by Processor and Bank, with sums sufficient to satisfy your current and future obligations as determined by Processor and Bank. You
authorize Bank to debit the Designated Account or any other account you have at Bank or any other financial institution to establish or maintain funds
in the Reserve Account. Bank may deposit into the Reserve Account funds it would otherwise be obligated to pay you, for the purpose of establishing,
maintaining or increasing the Reserve Account in accordance with this Section, if it determines such action is reasonably necessary to protect its
ii. Authorizations. Bank may, without notice to you, apply deposits in the Reserve Account against any outstanding amounts you owe under this Agreement
or any other agreement between you and Processor or Bank. Also, Processor and Bank may exercise their rights under this Agreement against the
Reserve Account to collect any amounts due to Processor or Bank including, without limitation, rights of set-off and recoupment.
iii. Funds. Funds in the Reserve Account will remain in the Reserve Account until 270 calendar days following the later of termination of this Agreement
or your last transmission of sales drafts to Processor or Bank, provided, however, that you will remain liable to Processor and Bank, for all liabilities
occurring beyond such 270 day period. After the expiration of such 270 day period you must provide Processor with written notification indicating
you desire a release of any funds remaining in the Reserve Account in order to receive such funds. You agree that you will not use these funds in the
Reserve Account for any purpose, including but not limited to paying chargebacks, fees, fines or other amounts you owe Processor and Bank under this
Agreement. Bank (and not Merchant) shall have sole control of the Reserve Account.
iv. Assurance. In the event of a bankruptcy proceeding and the determination by the court that this Agreement is assumable under Bankruptcy Code §
365, as amended from time to time, you must establish or maintain a Reserve Account in an amount satisfactory to Processor and Bank.
I'm told that the sponsor bank forces the providers to use this kind of language, whether they want to or not. Is it worthwhile to contact the sponsor bank and talk to them? There's no way on earth that I would agree to such terms. My money is mine. I'll pay the processing fees, but with a golden credit rating that I have, I won't be subjected to that BS. Has anyone here successfully gotten such clauses removed?
dan_grossman — 2010-02-09T16:50:47-05:00 — #2
All processors have something like this, though they don't make YOU open the reserve account, they do it. If your chargeback rate becomes too high, they start holding part of your processing volume in a reserve account to cover potential future losses. It's so that if you disappear, they can cover the expected chargebacks without having to sue you and potentially get nothing if you don't have the money anymore. You get every penny you earned eventually.
If you never have risk problems then they'll never need to hold a reserve.
dax702 — 2010-02-09T16:58:39-05:00 — #3
Sure that's fine for some typical sub-prime account. The fact that the operative language is in there has nothing to do if they will do it. It's the fact that they can do it.
People will tell you chances are there won't be any reserves, but especially in today's economic climate, that's a "chance" I'm not willing to take with my business. If you read the language carefully, it essentially gives them the ability to do what they want, without even notifying you that they're doing it in the first place. It's not acceptable.
I've been with BofA for 10 years and basically hate them like anyone else in business, but in those 10 years there have been no reserves. I'd like to make a change simply because I can't stand their business practices anymore, along with total lack of customer service.
I just put a call into the sponsor bank for this provider so a senior manager will supposedly call me back.
tigerstripes — 2010-02-17T23:40:44-05:00 — #4
A rolling reserve of some kind is pretty standard. After all, it makes good money for the bank. It also saves having to hit your main account with an outgoing transfer fee if you process a refund or get hit with a fraudulent transaction.
What you should be able to avoid, although some processors will try to ask for it, is having to pony up $1000+ just to set up a reserve account balance in advance.