A casualty of the profit chain
Small businesses, like small
fish, must always be on the lookout for hungry predators. A nibble here, a
bite there, and before you know it thereís nothing left.
For example, I was recently the victim of the old "bait
and switch" routine exercised by a big, fat fish Ė a large check
guarantee company that has revenues in the millions. In my business, which
is primarily retail, we have to accept checks. Most are good, some are bad.
Check companies guarantee any check they approve through their database will
be good. If it subsequently bounces, the company reimburses us.
The customer who bounced the check is placed in the check
companyís system until he or she reimburses it. Additional checks written
by that person will not be approved until that time. (The lesson to be
learned here, of course, is if youíre going to bounce a check for the
first time, make it a big one. Itís similar to the legal doctrine allowing
a dog one free bite.)
At least this company reimburses us. Another check guarantee
company we used was notorious for finding reasons to refuse reimbursement.
Usually it had something to do with our failure to document the check writerís
life history, including full criminal record, on the back of the check.
No, our current companyís service has been impeccable. Thatís
what I told Julie, its quality-control representative, when she called the
other day from corporate headquarters in Denver to survey my feelings about
the company. Talk about bad timing. "So youíre very satisfied with
the service," she re-capped confidently after I had answered her
questions, "and youíve had no problems with warranties or
"Great. Itís always good to hear from a satisfied
customer. So on a scale of one to five, with one poor and five excellent,
how would you rate our company?í
I was waiting for this.
"OK, less than one."
"You just said your were satisfied with the service,"
said Julie, perplexed.
"I am," I replied, "but Iím disgusted with how
youíve handled my fee."
I explained to her that the company sales person had sold me
the service in April, when I paid $200 for a lifetime service fee. The
contract stipulated the company would be paid 2.25 percent of the amount of
each check they guaranteed, with a minimum of $175 per month. After much
time, effort and training, the system was implemented.
In August, four months after the contract was signed, I
received a letter from the company informing me the minimum was being raised
to $400 per month. Perhaps worried that 2.25 percent of each check would not
amount to $400 per month (which it did not), the company showed its concern
by sending me another letter in November raising my rate to 2.75 percent.
Now my minimum was within reach. Thanks. Bait and Switch.
Once we were hooked into the system with our investment of time
and money, then raise the rates.
Poor Julie. She wasnít eager to listen to all of this. She
had been much cheerier moments earlier.
"Iím very sorry to hear that," she said, sounding
sincere. "Let me see what I can find out." She called back a few
minutes later. "I think I see the problem," she said.
"Our industry average for collection of bounced checks is
70 to 80 percent and weíve only been able to collect on 8 percent of
checks bounced to your business."
"Are you saying we have deadbeat customers?"
"Not necessarily," she lied. "Weíre just
having trouble collecting. Youíre coming out ahead."
"I certainly hope so. That was the idea."
"But we were losing money on your account."
Somehow I doubted that was true. Not making enough money might
have been more accurate. "Wait a minute," I said. "You
approve the check, it bounces, and when you have trouble collecting it you
raise our rates? What am I paying you for?" I was putting Julie on the
"Well," she stammered, "maybe we can put your
company on a Code 4 alert, which means weíll be more stringent about
approving checks. That way we can get your rate back down." It would
also mean irate customers and lost sales. Thanks again. You want to see a
Code 4, watch for my check paying the increased fee.