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KJLLAW, Attorney
Category: Business Law
Satisfied Customers: 1373
Experience:  Attorney at Law Office of KJLLAW
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I have opened two merchant accounts with a California based

Customer Question

I have opened two merchant accounts with a California based Merchant services provider. Two accounts were for two separate corporations, with me personally guaranteeing the accounts. (First account was opened in 2013 second in 2015). Second company went under and some chargebacks were filed by customers against the merchant account of that second company. Merchant services provider sent me letters asking to reimburse them for these chargebacks since the second company's bank account was closed. I requested from them a detailed list of chargebacks to substantiate their claim. They didn't provide the requested information, instead, they withdrew the money they claimed was owed by second corporation from first corporation's bank account (they have this information because the first corporation is still in business and at the time had an active merchant account with the service provider). My question is, is it legal for the merchant service provider to take money that they claim was due from second corporation from the first corporation's bank account, considering these are two separate legal entities and there is no agreement that one corporation would be a guarantor for the other? The only think linking these two corporations is me as guarantor for those merchant accounts.
Submitted: 1 year ago.
Category: Business Law
Expert:  KJLLAW replied 1 year ago.

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Good afternoon. The two accounts are for separate corporations and legally should be treated as separate entities. Unless you signed something stating that the companies would be linked for payments, overages, chargebacks, etc. they were not allowed to go into the first corporations account to pay any shortfall for the first company. If you personally guaranteed the contracts then arguably they could attempt to seek reimbursement form you personally, but not another corp., which you just happen to own, and has a merchant contract of its own. You should file a complaint with the California Attorney General, and with your bank.