In a perfect world…
Don’t get me wrong, Trade Associations are wonderful ventures. They give presence and weight to business that otherwise might get lost in the shuffle. They are the the proverbial school of fish that makes little fish look bigger to predators. The problem is that like in other areas there are some apples that just ruin the bunch, and if you don’t think power can corrupt have a conversation with a Teamster.
I have bid on several different companies in the past two years alone that had a trade association setup, “so there was no way to beat their rates”. Famous last words. In each case, I could beat the rate with no real sweat equity. In a couple, the rate was so bad as to be a bit embarrassing as to have to inform the business owner how bad they were being taken advantage of. How could that be? It’s a Trade Association. They have all the power. They have thousands of business so they can get better rates, right? The issue here is that the trade association soon realizes how much money is on the table and they very well could get a bonus or a percentage back from the merchant provider. This is not illegal. This is how the industry works.
Take your bank for example. They get a percentage. A good one. Really good. Before you ask, the answer is: “No. They are not the company processing your account.” They have an agreement with the company processing your account and they generally get 50% just for getting you to sign up with their processor. This is not illegal. It is their percentage for referring all of the business to that processor. Trade Associations can do the same thing, and just like drug reps wooing the local doctors offices; there are perks to sign up with them. The merchant account provider could very well offer a signing bonus for every account referred, or even a percentage. Thus the more they make, the more the trade association makes.
Now let me give two really good ‘outs’ so as to remove any trade associations from actually trying to take advantage of their individual businesses. 1) They are not merchant providers themselves. They do not know all the rules and all the ways businesses can be taken advantage of, and I am sure several have been duped themselves. Unfortunately, pride goes before the fall and many think that because they are (insert industry name here) Trade Assoc., that they have the power and the merchant providers would not dare take advantage of them. To this I have one business name to throw out: Wal-Mart. They thought they were big enough to buck the system and they found out it bucks back. 2) Rates increase over time unless actively fought. Without having someone to constantly watch your account and help you manage it, even if you got a fantastic rate (and in the beginning many do), it would slowly climb out of control. Maybe your trade association did get you a really good rate and their only perk back from the merchant provider was that all of their accounts would get really, really low rates. This is what the merchant provider does not tell them: without maintenance, rates go up. Way up.
This is one of the number one things I have to tell office managers and business owners that are often overpaying thousands of dollars per year. They more than likely were not paying that rate when they signed up. It just crept up so slowly they did not see it. More than likely they were not fooled to start with, they just thought the rate was static. It isn’t.