According to Forbes, the company claims that it does so to protect customers against risky transactions and chargebacks, however small businesses including legal consultants, construction firms, and plumbers have complained that Square began, with very little warning, withholding a portion of the money they had received from customers, and it seems that the company is applying the practice beyond industries that have been highly affected by the pandemic.
Moreover, the company described the withholdings as part of its ‘rolling reserve’ policy, adding that it had initiated the practice in late 2019 and expanded it after the COVID-19 outbreak to protect shoppers. Besides, Square stated that it applied the reserves policy based on several different factors, including the length of time the companies had been using Square, business documents the company may have on file, or the type of goods or services sold by them.
Although withholding parts of a transaction is a legal and common practice among payment processors, Square did not do so before. Additionally, in May 2020, the Bank of America downgraded Square’s stock to underperform on concerns that SMEs like restaurants, retailers, and salons will struggle to stay afloat due to the coronavirus crisis.
Consequently, more than 1,460 people have signed a petition on Change.org demanding that the company ends the ‘unethical business practice’, Forbes reported.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now