Unintended consequences of a stopped payment

Would you place a stop payment on your previous merchant account provider if you found out you had some absurd early termination fee?

We recently set up a new client that was referred to us. He operates a very small business that manufactures and sells a unique product that fits a growing niche. He had previously been processing with a payments provider that either set up his account incorrectly or that was purposely charging him outrageous fees. As an example when we started talking to him about signing up with us he was effectively being charged 30% in payment fees.

He was clearly not happy with that situation and was ready to find a better solution. We promptly got him set up and operational. What we found out later is his previous provider was trying to charge him a $2,000 early termination fee. When he heard about this fee he opted to do a stop payment on the couple hundred dollars in monthly fees they were charging him. Unfortunately, he didn’t realize that many payment providers use the same backend services that handle funding. So placing a stop payment on his old provider effectively placed a stop payment on us. A downside with placing a stop payment on a corporate bank account is whoever was accessing your account is no longer allowed to re-attempt any transaction to that account. It’s designed to prevent re-attempted charges which makes a lot of sense. Unfortunately, that includes deposits as well. As soon as the stop payment was received we were no longer allowed to fund that bank account.

We worked with the merchant and his bank to get this resolved as quickly as possible, but the bank was unwilling to lift the stop payment as it would allow his previous provider to access his account as well. He eventually ended up having to go through the cancelation process with his old provider and pay the early termination fee. Again during this process, we were not made aware of this early termination fee nor that he was going to place a stop payment on them. If we had been aware we may have been able to coach him on maybe getting that early termination fee lowered or removed. At the very least we could have helped him confirm if placing a stop payment would have affected our ability to make deposits into his account. Between all the hoops he ended up jumping through closing out his old account, it took 25 days for his bank to give us written permission to access his bank account.

Stop payments have their place, but should really be used as a last resort if at all possible. You should also reach out to your payments provider and ask for advice especially when it comes to another payment processor. We see all kinds of scenarios concerning bank accounts that most businesses never run into. While most people see our primary function as access to card payments a lot of what we do behind the scenes is focused on making sure our customers can stay focused on their business. Any time we can help prevent a bank issue from occurring is an excellent use of our time.

When working with payment providers feel free to be upfront and let your provider know what you are facing. A great merchant account provider will that the experience to at minimum make sure you are pointed in the right direction and can help steer your away from any pitfalls.