Tweet

Read The Fine Print!

Guest post by: Joseph Lizio

Article Overview: More and more businesses are wasting time and facing increased costs, simply because they are not reading contracts. In business you have to protect yourself and your assets as more service providers are hiding potential threats in the fine print.

Read The Fine Print!

What does Thomasson's eBay Store, the South Maryland Bar and Grill and MRITI Distribution have in common? They all got taken by the fine print!

John Thomasson opened his resale and consignment store less than two years ago and decided to sign up for a merchant services account from a very well known online service provider.

Prior to signing, John was very diligent as he did his homework; or so he thought. He asked all the right questions about fees, rates and the average collection time (the time frame it would take for him to receive the payments) and thought he made a good choice.

For the first year, John was extremely happy with his decision but when the economy started slipping, he began to see an increase in his monthly chargebacks. While the increased chargebacks caused him some concern, John just caulked it up to the state of the economy, adjusted his expenses for the lost revenue and continued as normal.

But, after having a large increase in chargebacks during the last week in August, John never received his payment from his processing company. He got on the phone to inquire about why his payment was being held up (John still had his expenses to meet). What he found out was that his merchant provider had frozen his account. It turns out that his merchant provider froze his account due to the increased chargebacks - events that had nothing to do with John or his business. When he started to complain, the customer service representative referred John to the fine print in their agreement. This fine print, hidden on the back side of the next to last page, stated that the merchant provider could withhold his payments for any reason and without notice for any length of time they deem necessary. Further, the merchant provider stated that they froze his account to allow added time to ensure that all potential future chargebacks could be accounted for. In all, it took John nearly two weeks before the provider unfroze his account and forwarded his funds. During this time, John had to close his doors. But, when he reopened, he reopened as a cash only business.

Bob and Cheryl opened their Bar and Grill in late 2002 mainly because their favorite neighborhood restaurant closed up shop. When they first opened, the two made sure they did all they could to protect the business as well as themselves and thus purchased a very comprehensive business insurance policy. Luckily, for more than 7 years, the husband and wife team never really had to think about their policy except to make the annual payments.

But, in December 2009, after seeing some checks bounce out of their business checking account, they discovered that their lunch time cashier had been stealing from the restaurant. Bob immediately turned to his insurance agent since the restaurant had such a comprehensive policy to include a theft rider.

It turns out that employee theft was not covered in their rider. The policy only covered theft from management/owners or from non-employees. Sure enough, when Bob pulled out his latest policy documents, he found, in the fine print, that the insurance company he had been paying large amounts of money to did not cover restaurants against employee theft - something that he thought was in the policy and one of the reasons that he bought the rider in the first place.

Turns out, during the restaurant's renewal beginning in 2007, the insurance company was seeing increased claims from employee theft and decided not to cover those types of events, yet also decided not to disclose their change up front to its customers but bury it in the fine print.

MRITI Distribution, a third generation business in medical equipment sales and distribution, decided to seek a $1MM loan to purchase a competing business.

The company went to the same bank that they have been a customer of for more than 25 years and requested the loan. MRITI worked very hard to ensure that it received the best rate and terms that it could possible get and was surprised when the quoted rates was only prime plus 1%. Needless to say the company jumped on the opportunity.

However, some 5 years into the loan, MRITI was having some issues in collecting prompt payments from its customers and this strain on its cash flow forced the company, in January of 2009, to send that month's payment in to the bank the afternoon on the day the payment was due (normally MRITI would send in its payments a few days early).

The following month, the company noticed that its monthly interest charges were up some 45% over the previous month and that their interest rate had jumped to prime plus 9%. The reason that the bank increased their interest rate was again buried in the fine print. The bank - hidden deep within the loan documents - included a clause that stated that all payments were, not only due on the due date, but due by 8:00am ET on the due date and that the bank could re-price both the rate and terms of the loan should the borrower remit payment after this date and time. Thus, even if MRITI was 1 second late, their bank could simply increase their interest rate without notice and without approval of the borrower.

Many businesses looking for ways to increase revenue and reduce costs are now turning to hiding disclosures in the fine print. While this is not a new practice, it does seem to be becoming more common place.

Businesses today don't want to openly show customers where they are cutting back services or modifying policies, while charging the same or greater prices, as they know some customers will run for the door. Thus, it seems that they figure as long as they can keep you in the dark with the fine print (and still comply with state and federal laws) their customers (you and me) will continue to pay. And, for the most part, they are right.

Most busy business owners do not take the time to fully read the documents they sign. Instead they tend to rely on the sales persons to tell you about the cons as well as the pros of the deal or purchase. But, by not reading and understanding the entire document, business owners are just opening themselves up to these types of shenanigans; costing themselves nothing but time, energy and, more importantly, money.

Further, while it would seem that only unscrupulous companies and individuals would employ these tactics, as more firms get away with them (showing how easy it is to pull the wool over customer's eyes), then more and more companies (even those with good reputations) will begin to use them regardless if it is right or wrong. As we allow this to continue, we will start to hear very common, but very troubling, statements coming from businesses employing these bad strategies; ‘well, everyone else is doing it - it is just the ways things are done now' - essentially creating a new status quo where it is OK to rip off and hide facts from your customers - in hopes they will never find out.

To protect yourself and all that you have worked for in your business, read the fine print. A little time taken now will surely save your business time and money in the long run.

Related Articles
  Rule 9 Never Ever Use All Caps
  Things to look for with a photo on canvas
  The difference between fixed term and minimum term business finance agreements
  PDF Your Board Package
  Your Health Insurance Policy
  Should the Print Newsletter Die - And Let Ezines Takeover?
  High quality canvas photo
  Print Newsletters vs. Email Newsletters - 6 Reasons Why You Should NOT Just Do an Ezine
  canvas artwork wall art
  Should the Print Newsletter Just Die - And Let Ezines Takeover?
  Home Business Expert: How To Advertise In Print Media
  Selecting an Online Home Biz
  Handling Too Many Emails and Speed-Reading on Screen
  Company Newsletters Give You PR Control
  How to Make Money Online--Legitimate Registered Company Offering Online Investment Opportunity
  Resolution of unable to print from Internet Explorer
  Bonehead Advertising Ploys
  How to write headlines that electrify and tantalize customers
  Sales 101: Product Knowledge
  Canvas photo prints

Article Tags: business, cash flow, fine print, loan, payment



Related Forum Posts
Website a must for new businesses! - The first thing anyone should do when starting out is to get a website. It doesn't have to be a fancy one, you it should explain the company, let people order samples, etc. Print papers and ads are just thrown away by 90% of the people who get them, I think... but a website is forever...
Re: Looking for a Blog topic? - Great advice GT. This and every other quality forum, every book you read, every article or website can be a source for your own writing. Find a topic, blog about it and LINK BACK to the source (or acknowledge the author if it is a book - or add an Amazon link). Every time you link out a good site you are giving your readers value. Don't worry about losing traffic or getting/not getting back-links. Just DO IT! It will make your blog much more informative and therefore more valuable and more attractive. The best blogs always have tons of links heading out to whatever good stuff the blogger finds. Read, learn, write, link. Read, learn... etc.
niche forum categories - I think Kevin just touched on the point that I was going make... and that is developing 'categories' that stick. Sales and Marketing may be too broad for example. However I can almost guarantee you that you would see many more sign-ups if you tailored a category to 'internet marketing' for newbies. I've seen this work on other forums, however, [i:1i903wkn]it can get a little frantic[/i:1i903wkn]... Fine tuning the categories, or expanding the scope should be effective. I think a lot of IM folks are surfing right on by because they're not finding what they're looking for here... Just a few thoughts: Better Blogging Developing Info Products Internet Marketing Presentation Skills More How to's Another point is... a lot of people don't know that they can benefit from participating in forums. The signature links to their site - if they have one - can / should be motivation enough to get more involved. The more internet savvy members that have signatures seem to stick around more... Don't you think?
Re: What I'm reading this weekend - Jan 21, 2011 - I'm already working my way down the list. Read 3 of them so far. Thanks as always!
Re: Don’t worry, Enrich your life and Be happy - [quote="lisa":1rc4ik2q]Start saying positive things especially about yourself. How you communicate to yourself affects your thinking and your emotions, as well as your self-esteem.Change your mental pictures. What and how you see yourself and your surroundings make a difference to your thinking.Read more. Read about how those people who fought fear with courage and succeeded in life. Through reading, you will gain new knowledge and understanding and it will help you clear whatever is blocking your thinking and create more ideas. [/quote:1rc4ik2q] Lisa is right about this. Positive self talk can really make a difference. When you catch yourself saying something negative (whether verbally or just thinking it), turn it around and make it into the opposite. You have to remember to do this continually until it's just habit that the positive thought/saying becomes the first thing you hear instead of the second. It becomes automatic.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

SEO and the Entrepreneur

What is Discretionary Cash Flow

The True Cost of Employee Turnover

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.