John Jacobs was skeptical of the claims made by a salesman who showed up at his Sierra Vista restaurant in January 2013.
The salesman said Jacobs and his wife, who own Bunbuku Korean and Japanese Restaurant, could save hundreds of dollars by switching to Merchant Processing Solutions for their credit-card transactions.
The deal with the California-based company, which also does business as Payment Systems Corp. — and recently agreed to settle fraud complaints with the state — turned out to be a costly mistake for Jacobs.
Despite his misgivings, particularly after the salesman said the offer was good for one day only, his wife was enthusiastic about saving money and they signed a contract.
“It was all haywire,” Jacobs said.
New fees appeared on monthly statements and most credit cards were ineligible for the flat 1 percent fee offered by the company, he said. More than two years later, he estimates he has paid $3,353 more than he would have if he had stayed with Wells Fargo.
The last straw for Jacobs came in January when he called the company to end the contract. He was told the two-year contract he signed was actually valid for four years and he would have to pay thousands of dollars to get out of it.
“I bit my tongue for two years, but when I tried to cancel and they said ‘too bad, you signed for four.’ I said ‘I can’t take two more years of this,’” he said.
Jacobs and 24 other Arizona business owners, including five in Tucson, complained to the Arizona Attorney General’s Office. Now, the company will pay as much as $73,000 in restitution and investigative fees, according to an Aug. 27 assurance of discontinuance filed in Maricopa County Superior Court.
Court records show the company agreed to pay nearly $47,000 in restitution to business owners, $16,500 to the Attorney General’s Office for attorney fees and investigative costs, and up to $10,000 to businesses that file a complaint in the next six months.
The company told business owners they would pay a flat 1 percent fee for credit-card transactions, but that fee often rose to 2.79 percent, court records show. In all, the merchants who complained to the attorney general paid at least $31,000 at the higher rate.
The attorney general alleged the company violated the Arizona Consumer Fraud Act, but the company denied all allegations, court records show. The acceptance of the assurance of discontinuance is not considered an admission of violating the law.
In September 2014, Payment Systems Corp. agreed to a similar assurance of discontinuance with the Vermont attorney general for alleged violations of the Vermont Consumer Protection Act. The company agreed to pay the state $100,000.
Per the agreement with the Arizona Attorney General’s Office, the company must clearly communicate the transaction surcharges and leasing terms included in the contracts. The company cannot offer special promotions as “for today only” if they are always available.
Business owners will receive about $32,000 in restitution for fees in excess of the 1 percent credit-card transaction-processing rate. Another $15,000 will go to business owners who complained about the equipment leases.
