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Office of the Vermont Attorney General

New Law Curbs Abuses by Credit Card Terminal Lessors

July 10, 2018

CONTACT: Charity Clark, Chief of Staff, 802-917-1993

Small businesses were often targeted, forced to overpay thousands of dollars

A law to help small businesses, which was championed by Attorney General T.J. Donovan, went into effect on July 1. Act 4, “an Act relating to regulating finance leases for credit card terminals,” regulates leases of credit card terminals to smaller merchants. These terminals often cost a few hundred dollars to purchase, but are leased for thousands of dollars by predatory finance leasing companies. The leases are not cancellable and extend for 4 years. Act 4 puts protections in place to curb unfair practices by finance leasing companies. Specifically, the new law will give small businesses more, and clearer, information about lease terms and will allow cancellation within 45 days of entering into a credit card equipment lease.

“Small businesses are the backbone of our communities,” Attorney General Donovan said. “They deserve an equal playing field, and this law will help. I want to particularly thank the consumers who called our office to report this problem. I also want to thank the bill’s lead sponsors, Sen. Chris Pearson and Rep. Jim Harrison.”

The Attorney General’s Consumer Assistance Program (CAP) reported that it received more complaints about credit card equipment leases than any other type of complaint by business consumers. As a result of these complaints, the Attorney General’s Office approached lawmakers about possible legislation. The legislation addressed the most common complaints, such as salespeople quoting a price much lower than the price ultimately debited from the merchant’s account.

“We hear from members daily about the monthly costs they face surrounding the credit card industry. And unless businesses are strictly online, credit card processing terminals are a must-have in today’s retail landscape,” said Erin Sigrist, president of Vermont Retail & Grocers Association. “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. We thank the AG’s office, the legislature, and Governor Scott for their support in making rental of credit card processing terminals more transparent.”

Some of the highlights of the law are:

        • Disclosure of whether the terminal can be purchased and if so, the cost of purchase;
        • Contact information for the parties;
        • An explanation of the salesperson’s relationship to the entity financing the lease;
        • A prohibition of “forum shopping,” which refers to some finance companies’ practice of A 45-day cancellation period. This is designed to allow a merchant to receive a bank statement so they can see how much is actually being debited from their account before committing to a 4-year lease; including in the contract a clause that chooses a court with laws more favorable to it than to the merchant;
        • Requiring a reasonable font size.

    If you have questions about credit card terminal leases or would like to file a complaint, contact the Attorney General’s Consumer Assistance Program by phone at 800-649-2424, or by e-mail at AGO.CAP@vermont.gov. You can also file a complaint online at consumer.vermont.gov.

Last modified: July 10, 2018