February 27,2009
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News: Wells Fargo, A Tragic Misuse of TARP Funds?
After accepting $25 billion worth of funds to promote credit card lending, Well Fargo appears to be hoarding it. At least the is the viewpoint of a Southern California behavioral healthcare treatment center. The payments being denied are credit card payments from the center's patients. President of California-based ‘A Better Tomorrow Treatment Center, Inc', Jerrod Menz is outraged as he explains that Wells Fargo is holding back funds that patients have already paid with credit cards for treatment services.
For four years now, the treatment center has relied of Wells Fargo to process credit card payments, summing to about $700,000 a year in from their patients. The center provides behavioral healthcare. The center was never alerted when, suddenly last week, Wells Fargo decided to put a hold on payment for tens of thousands of dollars in credit card transactions that were payments to the center for patients' treatments. After making five calls with messages, Wells Fargo did not return any of them. When finally, a representative from the center actually went to the Wells Fargo office he found that the bank had decided to not to process any more cards for the business until the business had put away $200,000 in cash as a reserve. This is an impossible task for a small company like ‘A Better Tomorrow' and now, they're slammed with an unbearable shortage of operating funds.
When this was explained to a senior representative from Wells Fargo's merchant services. The response was that it was "not Wells Fargo's concern". It was explained that the same rule was also being applied to the processor's other clients without notice, as well. Wells Fargo is simply holding back moneys that have already been charged as payment to the center.
A little further explanation may be necessary here. What most merchants don't usually realize is that the actually payments don't come from processors. They come from all the individual cardholders' various lending banks. This process usually takes about two weeks. To relieve the merchants from having to wait that long, however, most processors will ‘front' the money in good faith that the transactions are valid and, pay the merchants within three days. After the two weeks, the processor will then be paid pack by all of the various lending banks. Any credit card transactions that turn out to be bad may have to be ‘eaten' by the processor as a total loss. Wells Fargo may presently be too low on funds for this risk. If this is the case, the center should still get payment within two weeks.