03/22/2012 06:40 EDT | Updated 05/22/2012 05:12 EDT

Businesses hit by hidden fees from credit card machines

Small businesses across Canada are reporting hidden charges and misleading sales practices in their dealings with some of the contractors who supply them with credit and debit card machines, CBC News has learned.

A web of subcontractors sells the machines and payment services to small businesses across the country.

CBC News has spoken to more than two dozen small business owners who say they have fallen victim to hidden payments or surprise fees they had not bargained for.

"Credit card processing charges has been a growing concern for Canadian small businesses for a couple of years," says Dan Kelly, senior vice-president of legislative affairs for the Canadian Federation of Independent Business.

"There are mysterious charges that business owners feel like they've never agreed to that show up on many of these statements."

Merchants can pay anywhere from two to 4.6 per cent of the total value of a sale for each credit card transaction.

Some 'worrisome' companies

Kelly says while there are many reputable companies in the field, "others are quite worrisome and use practices that we feel are very unfair to small companies."

The CFIB received more than 1,800 calls about credit card processor issues last year, and Kelly said many of them detailed horror stories.

While the CFIB is not naming names, CBC News has spoken to small business owners who have had headaches dealing with some of the payment providers.

Winnipeg tax preparer Glenda Legadi says she is out close to $1,800 after signing up for what she thought was a better deal on her credit card processing last August.

Soon after she signed, her bank account was being debited.

'What is this $50?'

"I was surprised … what is this $50? And then there's another thousand something, and it just kept on going," Legadi told CBC News.

Legadi had a contract with Pivotal Payments of Montreal. After CBC News contacted the company, it said it would provide Legadi with a full refund within 48 hours.

"We will be conducting additional training on customer service resolution as well as a complete review of our processes to ensure timely and accurate refund for complete and satisfactory resolution," the company said.

In an interview, Pivotal spokesman Damien Tannenbaum said salespeople are sometimes overzealous in how they represent the product, but those cases are rare and dealt with swiftly.

Tannenbaum said his company treats customers fairly.

"We do have humans doing the job, so nobody is perfect," he said.

Leasing, Interac fees

Steven Knowles, owner of Bell City Cabs in Toronto, signed a contract with a company called Monex in 2007.

Knowles says he agreed to terminal leasing and Interac fees of seven cents per transaction. But he says that is not what he was billed.

"We were paying 15 [cents] and as high as 18 cents … would you be satisfied with that as a consumer?" he said.

Knowles says it cost his business thousands of dollars.

In a written statement, Monex's marketing director told CBC News that Bell Cabs was only charged what was agreed to in the contract.

"These financial regulations are complex and easily misconstrued and misunderstood," Markus Lutz said.

Lutz added that Bell Cabs stopped using the service with more than two years remaining on its contract, and ended up owing $10,000 as a result.

John Gedeon, a Monex spokesman, earlier defended his company's practices and said they are happy to address customer concerns.

Voluntary code of conduct

Two years ago, the federal government enacted a voluntary code of conduct asking companies to be flexible and clear in their dealings with merchants.

But a document obtained by CBC News through the federal Access to Information Act shows that the agency in charge of monitoring these businesses recognizes problems in enforcing the code.

Ursula Menke, commissioner of the Financial Consumer Agency of Canada, says the voluntary code of conduct requires credit card companies such as Visa and MasterCard to ensure compliance with the suggested rules.

But in the document, Menke adds: "There is an unrealistic expectation on PCNOs [credit card companies] to ensure compliance in an effective and timely manner."

Bookkeeper calls for federal action

In B.C., bookkeeper Mandy Drope says it will cost her Garden Centre in Sechelt more than $5,000 to get out of a lease on point of sale machines she can't even use.

She thought she was getting a good deal when she signed on with Pivotal Payments, but ended up paying double the fees she expected to process customer payments.

When she tried to cancel, she was told there was no way out of a four-year lease on two point-of-sale machines she can't use.

"They get you trapped into working with them because of these threats, because of these leases on the machines," she said.

She wants the federal government to step in and monitor the industry.

"I feel completely like I've been lied to and not just once, but over and over and over again. It's just outrageous. So I think it needs to be regulated. They don't need to make so much money on the backs of small business."