Arkansas screwed up restricting termination fees!

A few weeks ago Arkansas passed a law that would cap merchant account termination fees to $50, or one month’s minimum charge.

Download Arkansas Act 911 ^.pdf

This law was passed un-democratically “quickly” as the Arkansas congress drafted, and passed it without any notice to media, processors, banks, citizens, or even merchants until the law was written.

As far as the law itself, it mainly requires processors to be transparent in the contract length, and any termination or other fees that would be incurred if a business closed their merchant account before the contract was ended. It ensures that merchants can read the contract because it goes as far as setting a minimum font size for the merchant application. The law does not provide any protection for businesses in leases, or other equipment related recurring fees or charges. It also only applies to businesses signing up after July 31, of this year.

Overall the fee transparency is something that a lot of ISO’s need to address better. Capping termination fees without any input from processors is completely unfair, even though termination fees are often excessive. The law is trying to help businesses from getting scammed but because of some poor editing, it isn’t going to do anything.

Here’s where they went and messed the whole thing up:

(d) The foregoing provisions of this chapter do not apply to:
   (1) A state bank or a state savings association that offers a credit card processing service;
   (2) A national bank or a national savings association as defined 31 in 12 U.S.C. 1813, as it existed on January 1, 2007, that offers a credit card processing service; or
   (3) The parent, affiliate, or subsidiary of any bank or savings association that offers a credit card processing service.

Well, they effectively voided out this entire document with #3. Since every legal ISO is an affiliate of a bank, this law no longer applies to anyone, unless they are somehow providing services illegally, in which case they probably have other things to worry about. Someone obviously was mad, in a hurry, and forgot to do their research because it doesn’t take much see the conflict.

I guess that’s what happens when you pass a law without any public notice or input.