Avoiding Terminal Lease Traps

A salesperson sets a new terminal on your counter, tells you the processing rate is low and says the machine is just a small monthly payment. You sign a single page on a tablet, and the contract you actually agreed to is with a leasing company you have never heard of. Four years later you are still paying for a device that costs a fraction of what you have handed over.

That scenario is common enough that equipment leases are one of the most frequent complaints in merchant services. Not every lease is a trap, and leasing can be reasonable in some situations. But the pattern of long terms, non-cancellable language and inflated totals is worth recognizing in advance. This guide explains how it works and how to protect yourself.

How the trap is built

In a typical lease, the terminal is financed through a third-party leasing company rather than the processor. The agreement is separate from your merchant account, has a fixed term of perhaps 36 to 48 months, and often states that it cannot be cancelled, even if you close your business or change processors. The leasing company is paid whether or not the terminal ever works.

The total payment is what matters. Say a lease is $70 a month for 48 months. That is $3,360, in this hypothetical, for a device that may be available outright at a small fraction of that. The monthly figure sounded small, and the total was never put in front of you.

Warning signs in the paperwork

Look closely before signing anything with equipment on it:

• Language such as non-cancellable, hell or high water or irrevocable for the full term.
• A leasing company name different from the processor, with its own address and terms.
• Automatic renewal or a clause that extends the lease unless you return the device within a narrow window.
• Charges for insurance, property tax or late fees that are not explained verbally.
• A requirement to return equipment at your own expense, or a purchase option at an inflated price.
• A signature page that does not show the total cost of the lease.

Rent, lease or own

Purchasing a terminal outright is often the least expensive route, particularly for basic countertop devices, because the price is usually low compared with years of lease payments. Short, cancellable rentals can make sense for seasonal needs or when you are testing a business, provided the monthly cost is reasonable and you can cancel without penalty.

Another route that avoids both is reprogramming. Many existing terminals can be loaded with new settings and keys to run on a different processor, so you may not need to buy or lease anything. MCCPS often keeps the re-programmable terminals merchants already own, which removes the equipment question from the move entirely.

Questions to ask before you sign

Ask each one out loud and get the answers in writing. Who owns the device, and who do I pay? What is the total I will pay over the full term? Can the lease be cancelled, and at what cost? What happens if I change processors or close the business? Is there a buyout option, and what is the price? Who services the device, and what happens if it breaks?

A trustworthy provider will answer plainly. Evasiveness about the total cost or insistence that you sign immediately is a signal to slow down. Taking the paperwork home for a day costs nothing.

If you are already in one

Start with the document. Find the term end date, the monthly payment, the remaining balance and any buyout clause. Then ask the leasing company, not the processor, for a written payoff quote. Sometimes a negotiated lump sum is lower than the remaining payments. Check whether the terminal can be reprogrammed to work with a new processor while the lease runs, which lets you improve your pricing without waiting for the lease to end.

If you believe the lease was misrepresented, collect the contract, any sales materials and the dates of conversations, and consider consulting an attorney or your state's consumer or business protection office. This is general information, not legal advice.

A quick protection plan

Use this routine for any equipment decision.

1. Ask for the total cost over the whole term, not just the monthly payment.
2. Compare it with the purchase price of the same or equivalent device.
3. Read the cancellation, renewal and return clauses.
4. Check whether your existing terminal can be reprogrammed.
5. Keep copies of every page you sign, including the leasing company's terms.
6. Calendar the end date and return requirements.

Getting a second opinion

MCCPS will look at your equipment paperwork and statements as part of its free, no-obligation savings analysis, and can tell you whether your terminal is a candidate for reprogramming. Call 844.826.6227 before you sign a lease, or to review one you already have.

This article is general information, not legal, tax or compliance advice. Card-network and state rules change — confirm current requirements before acting. Savings depend on your individual statement analysis.