Key takeaway: Merchants locked into auto-renewing contracts with undisclosed equipment leases or steep cancellation fees now have a concrete example in this FTC payment processor case. Riverside Payments customers specifically get a 60-day window to exit without penalty once a court approves the order.
The Federal Trade Commission and Washington State have proposed a settlement with Riverside Payments Inc., its equipment-leasing affiliate Cascade Equipment Leasing LLC, and the companies’ owners, Brandon Skinner and Jason Reese. The proposed order resolves allegations that the companies hid auto-renewing contracts, equipment leases, and a $695 early termination fee from small-business merchants. As of this writing, a judge has not yet signed the order, so it does not yet carry the force of law.
According to the complaint, Riverside’s sales materials promised merchants savings of 40% to 60% on payment processing. The materials omitted hidden fees for activation, batch processing, data-security non-compliance, and inactive processing. Many businesses ended up paying more than they had with their previous processor.
A 26-page electronic contract buried several terms, regulators said. These included a three-year auto-renewal clause, the $695 early termination fee, and equipment-leasing fees that ran a year longer than the processing agreement itself.
The complaint also alleges Riverside advertised a “no-risk” cancellation guarantee. Merchants who tried to cancel often got no response, and some who were willing to pay the termination fee were told to wait for a callback that never came. Riverside also falsely promised to switch dissatisfied customers back to their original processor and pay them $500 for their “time and hassle,” the complaint alleges.
On recruiting, the complaint alleges Riverside promised sales agents annual earnings of $75,000 to $95,000. The average agent actually made $3,787 per year.
FTC Bureau of Consumer Protection Director Christopher Mufarrige said Riverside and Cascade promised small businesses significant savings. Instead, he said, the companies locked merchants into costly, multi-year contracts and made cancellation very difficult. “The FTC will hold accountable companies that deceive small businesses, whose hard work powers our economy,” Mufarrige said.
Under the proposed order, the defendants will pay $600,000 upfront. A $32,083,921 judgment against Riverside, Skinner, Reese, and Cascade is suspended based on their stated inability to pay the full amount. The full judgment becomes due if regulators later find they misrepresented their finances.
Riverside must also let merchants rescind their processing agreements without a termination penalty. The company will waive the early termination fee, or any rescission penalty, for 60 days once the order takes effect. The Commission voted 2-0 to authorize the complaint and stipulated order. The FTC and Washington filed both in the U.S. District Court for the Western District of Washington.
Why it matters: The case reminds merchants to check small-business payment-processing contracts for auto-renewal clauses, equipment-lease terms, and cancellation fees before signing. Regulators are increasingly treating buried contract terms like these as a consumer-protection issue rather than an ordinary billing dispute.