Controversy For Square? Jack Dorsey Accused Of Taking Too Much Money From Partnered Retailers

Square Inc., the mobile payment company co-founded by Twitter CEO Jack Dorsey, has been accused of holding 20-30% of the money it collects from retailers. Despite company efforts to explain this practice, it is nonetheless facing strong criticism for taking too much money during harsh economic times.

A petition against the issue has begun circulating amongst companies that utilize Square and has already garnered 1,300 signatures.

“Small businesses can barely survive as it is, and now that Square, Inc. is withholding funds, many more small businesses are going to be closing because of Square,” the petition reads.

In a blog post Tuesday, Square called the practice “rolling reserve” and explained that it is done to ensure against “risky sellers.” According to the company, these types of sellers include those that take early payments for certain services and those that deal in goods that are “prone to disputes.”

“The vast majority of our sellers don't fit this profile,” the statement explained. “For the small number who do, we put in place reserves that allow them to continue processing with Square (as opposed to being deactivated, as many financial institutions will do), particularly during uncertain times.”

These reserves are released back to sellers they are taken from on a “rolling basis” over a number of days, as many as 120 days.

A report from the New York Times has shed light on the practice, with some small businesses claiming to have been disproportionately impacted by it. One company, Legal Knock, claimed that despite it never having a request for a refund, Square withheld $4,000 in rolling reserve last month. It further claims that Square was difficult to reach during this time and, once they did respond, did not provide a satisfactory explanation.

“It may not be the coronavirus that puts us out of business but actually the greed of Square that breaks the camel’s back,” Jesse Larsen, the owner of PennyWise Contracting in Washington state, told the Times.