[V]ermont’s attorney general is touting a new law that seeks to protect small businesses from “predatory” credit card terminal leases.
The law, which took effect on July 1, aims to regulate the “unfair” leases, which are the leading source of complaints from businesses to the attorney general’s consumer assistance program.
The office says that while the credit card terminals only cost a few hundred dollars to purchase, many companies lease them to small businesses for thousands of dollars.
The terms of these leases often make them impossible to cancel and typically box small businesses into a contract for up to four years.
The new law requires companies to disclose whether the credit card terminals they’re leasing can be purchased, and if so, at what cost.
It also gives companies a 45-day grace period for canceling credit card equipment leases.
“So you aren’t locked into this four-year lease where you’re spending some serious money,” Attorney General T.J. Donovan said Tuesday.
Sen. Chris Pearson P/D Chittenden, a co-sponsor of the legislation in the Senate, said that small business owners are particularly vulnerable to misinformation from predatory companies that sell credit card terminals.
“When you call [credit card terminal companies], you’re feverishly finishing painting the inside of the building hoping you’ll get it done before opening day,” he said. “On the phone, they tell you they can give you a deal for 2 [percent] and 20 [cents] a swipe.”
Erin Sigrist, president of Vermont Retail & Grocers Association said her organization hears concerns from members about costs from the credit card industry on a daily basis.
“While there is much work to do to ensure transparency in all aspects of credit card processing, Act 4 will help ensure that small businesses have a better understanding of what type of hardware lease business owners are getting into,” Sigrist said in a statement.
Every few months, the attorney general receives complaints about credit card equipment leases, according to Charity Clark, Donovan’s chief of staff.
Pearson said companies hike terminal prices 10 or 20 times the actual cost. In one case, it cost $6,000 to lease a terminal; it cost $300 to purchase.
“These leases are effectively usury,” Pearson said.
While the issue is prevalent enough around the state to cause a stir within the small business community, Pearson said not all credit card companies are predatory. The law codifies proper practices that good actors are already using, he said.
Donovan said the new law is a “common sense solution.”
“This was the No. 1 complaint that we kept hearing about … so I’m proud of the fact that we tried to solve the problem.”
