Wednesday, May 16, 2007

Contractual obligations

The Outpost's bank since its inception had been First Citizens until it was absorbed by Western Security Bank. I have no complaints about the new bank, especially since it has been buying some ads from us, but the worst part of the deal has been that we had to change our credit card processor.

The deadline for the change to Nxgen Payment Services was Monday, so naturally I put it off until then. Then I read through the application, which was wickedly obscure and had all of the important provisions printed in type that no doubt was Nxgen's entry in the World's Smallest Typeface contest.

But I waded through it and was about ready to sign off until I reached the cancellation provision. If we change processors in the next year, we have to pay Nxgen $295. If we change in the next three years, we have to pay $195.

Online opinions differ about whether processing companies are justified in asking for cancellation payments, but I wasn't eager to make a three-year commitment to a company that I have yet to transact a single item of business with. I liked this provision even less: "Merchant agrees that the early termination fee is not a penalty, but rather is reasonable in light of the financial harm caused by Merchant's early termination."

Say what? How can I legally bind myself to something that I have absolutely no way to know is true? What's "reasonable"? We don't use processing equipment, so Nxgen has no expense there. So far as I know, the only start-up expense it bears is the cost of telling us what phone number we have to dial to enter credit card transactions. From then on, it makes a profit on every transaction. Beyond that, Nxgen's only risk is that I will cheat my customers and they won't honor their credit card transactions. But we have a 10-year spotless history of meeting those obligations, and I am as likely to win the lottery as to start cheating customers now.

The only real financial harm Nxgen faces is that if I don't sign the contract, it won't get a chance to gig me for 200 or 300 bucks if I don't like its service. I agree that this is financial harm that Nxgen will certainly incur.

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