FTC, Washington Settle Small-Business Payment Case: Consumer Protection

The news: The Federal Trade Commission and the State of Washington announced a proposed settlement with payment processor Riverside Payments Inc., its affiliate Cascade Equipment Leasing LLC and their operators. The companies will pay $600,000 to resolve allegations that they deceived small businesses about the cost of payment processing and about how hard it was to leave.

Key takeaways:

• The FTC and Washington allege the firms falsely promised small businesses they would save money on payment processing.
• Businesses were allegedly enrolled in automatically renewing processing contracts and equipment leases without clear disclosure.
• Despite offering “risk-free” cancellation, the companies allegedly made canceling nearly impossible.
• Under the proposed order, small businesses will be able to rescind their processing agreements without a termination penalty.

By the numbers:

• $600,000: the payment the companies and their operators will make to resolve the case.
• 2: the companies named, Riverside and Cascade, along with owners and executives Brandon Skinner and Jason Reese.

Why it matters: Payment processing is a fixed cost for many small merchants, and a contract that renews automatically can lock in that cost for years. According to the complaint, Washington-based Riverside and Cascade pitched savings but did not clearly tell businesses they were signing up for auto-renewing processing contracts and an equipment lease. The agencies say the “risk-free” cancellation promise did not hold up in practice.

An FTC official said the companies “promised small businesses significant savings, but instead of saving money locked them into costly, multi-year contracts and made it very difficult to cancel.”

The rescission provision may matter as much as the money. Letting affected businesses exit without a termination penalty addresses a core complaint, which is that leaving was either blocked or costly.

The big picture: The case is a reminder that consumer protection rules reach business-to-business sales as well as household ones. Small merchants often lack the legal staff of larger companies. They can face the same pressure tactics, fine print and cancellation hurdles that consumers meet with gym memberships or subscriptions. Here the FTC and a state attorney general’s office acted together, a pairing that can widen the tools available to regulators.

For owners, the case points to practical checks before signing a processing or equipment agreement:

• Look for automatic renewal language.
• Look for a separate equipment lease.
• Look for any termination fees.
• Get any promised cancellation terms in writing.

What’s next: The settlement is a proposed order, so it must still go through the approval process before it is final. Businesses that believe they were enrolled in agreements with Riverside or Cascade should watch for official instructions on how the rescission option will work. Details on that process had not been spelled out in the announcement.