Sued by FTC, MPI Begins Turnaround, Looks to Expand to Midwest

The new chief executive of Merchant Processing Inc. says his independent sales organization is on the road to recovery five months after the Federal Trade Commission accused the ISO and its then president of defrauding merchants and had MPI placed in receivership. James Keller, a certified public accountant with experience in turning around troubled companies, tells Digital Transaction News that his time at MPI so far “has been very positive. There's been a learning process for our merchants.” Since May, Keller has implemented an overhaul of the sales staff and back-office support at Beaverton, Ore.-based MPI. He now plans to expand the firm's presence into the Midwest. Most of MPI's approximately 5,000 merchants, primarily small retailers who collectively generate about $360 million in annualized charge volume, are on the West and East Coasts. But any expansion will remain within the bounds of MPI's customer-service and technical-support capabilities, Keller says. “The key for me is I absolutely am not going to outgrow the infrastructure of this business,” he says. A court-appointed receiver, Michael Grassmueck, hired Keller after the FTC filed a civil action April 11 in U.S. District Court in Portland, Ore., accusing MPI and its owner, Aaron Lee Rian, of deceptive business practices (Digital Transactions News, May 29). MPI allegedly told merchants it would offer them lower discount rates if they switched their payment-processing business to MPI. Many merchants, however, complained of being hit with surcharges for certain transactions and miscellaneous fees they didn't know about. The ISO also allegedly induced merchants to sign four-year leases on payment terminals that MPI claimed they must have as part of its processing service. To get them to take the terminals, MPI allegedly told merchants it would buy out their existing leases with previous processors, but didn't follow through and charged merchants high cancellation fees when they tried to get out of their contracts, according to the FTC's complaint. In addition, the FTC named as defendants two other firms Rian controls, Vequity Financial Group Inc. and Direct Processing Inc. Washington State also sued the defendants. The FTC is seeking a permanent injunction barring MPI's previous business practices as well as refunds, court costs and other “equitable relief,” according to its complaint. Rian's lawyer, Portland attorney Stephen Feldman, tells Digital Transaction News that he can't comment in detail on active litigation, but says, “As far as Mr. Rian is concerned, he denies the allegations.” Besides implementing a house cleaning in MPI's direct and contract sales forces, Keller says he's embarked on improving MPI's customer service. He polled a sampling of merchants shortly after his arrival. “One of the things they stressed was customer service was terrible, tech support was terrible,” Keller says. That input induced Keller, who has experience with food-service, brokerage, and manufacturing companies and has four turnaround stints under his belt, to implement training programs for the support staff. He also brought in Omaha, Neb.-based merchant-processing consulting firm The Strawhecker Group for help, particularly on underwriting. Without giving numbers, Keller says MPI's merchant attrition was “high by industry standards” when the FTC moved in, but adds that “I've been favorably impressed” with the changes since then. Robert Schroeder, the FTC's assistant regional director in Seattle, says resolution of the court case could take a year or more unless there is a settlement.