Small Businesses Affected By Credit Card Processing Company’s Customer Payment Withholdings

Some businesses that rely on Square to process credit card transactions have had up to 30% of customer payments withheld during the pandemic

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Imagine still doing decent business despite the conditions created by the pandemic but struggling because of some customer payments being withheld through no fault of your own?

That’s what is currently happening to some small businesses, according to a report in the New York Times. Thousands of small businesses — including construction contractors — that use Square to process credit card transactions are saying that the company is holding on to 20% to 30% of their customers’ payments during the pandemic. Those businesses say the withholdings came with little warning and that Square claimed to have a right to hang on to the money for the next four months. According to Square, it’s being done to protect against risky transactions or customers who demand their money back, but several businesses provided documents to the New York Times showing they had not had any returns or risk flags.

“It may not be the coronavirus that puts us out of business but actually the greed of Square that breaks the camel’s back,” Jesse Larsen, owner of PennyWise Contracting in Olympia, Washington, told the New York Times.

Larsen says Square began holding on to 30% of each transaction in early May, which has totaled thousands of dollars for him. Without those funds, Larsen says he had to put a hold on hiring and sold some personal property to help operations.

According to a recent blog post published by Square, the company began holding back money in late 2019 and expanded the practice after the pandemic-induced lockdowns as a way to protect consumers against losses. It said it had done this on only 0.3% of its millions of merchants.

“We apply reserves on more ‘risky’ sellers, such as those that take prepayment for goods or services delivered at a future date, sell goods or services more prone to disputes, or operate in an industry that historically receives higher chargeback rates than others,” Square said in the blog post.

But some businesses that have had payments withheld say that “risky” label doesn’t apply to them and that it’s unfair for Square to use them to help with the company’s financial cushion. Square focuses on merchants with physical stores, so it was hit harder by shelter-in-place orders than some other technology-focused payment companies.

“My company is not going through a hard time, so why punish my people? You are stealing other people’s money,” Nikol de Riso, a business owner in Palmetto, Florida, told the New York Times that she had said to Square when inquiring about the payments being withheld.

Source: The New York Times



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