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Gravity Payments' Processing Practices Questioned The company's coding practices could potentially result in fines for small businesses that use Gravity as a payment processor, according to citizen journalist Doug Forbes.

By Geoff Weiss

Opinions expressed by Entrepreneur contributors are their own.

Gravity Payments

Gravity Payments, the Seattle-based credit card processing company that garnered international acclaim after CEO Dan Price raised minimum salaries to $70,000, has been improperly classifying payments it processes in a way that could put many of the small businesses it serves at risk of thousands of dollars in fines, according to a new report.

That accusation comes from documentary filmmaker Doug Forbes, who published the results of what he calls a four-month-long investigation into the company on his website, Hundred Eighty Degrees. Forbes alleges that Gravity Payments used incorrect coding for bars and restaurants when it processed card transactions. In the credit card processing industry, every merchant is categorized according to a Merchant Category Code (MCC), which helps determine the interchange fee, or the amount that merchants must pay to card-issuing banks per credit card transaction. Forbes says Gravity Payments has intentionally misclassified at least 400 different restaurants (which should be MCC-5812) as bars (MCC-5813) in order to offer merchants lower interchange fees. (Restaurants generally have higher ticket transactions, and therefore higher interchange fees.)

By miscoding restaurants as bars, Gravity Payments gains an unfair competitive advantage, Forbes told Entrepreneur, in that the practice allows the company to offer prospective merchants far lower rates than competing processors (who are coding properly) could ever propose.

Related: Dan Price's Ex-Wife Stands By Domestic-Abuse Allegations in Latest Blog Post

As proof of the miscoding, Forbes has taken screenshots from Visa's Supplier Locator, which shows 191 miscoded restaurants in Seattle, 80 in Honolulu, 48 in San Diego -- and so on. But assuming that Gravity Payment has miscoded hundreds -- if not thousands -- of restaurants over the course of the past 5 to 10 years, Forbes writes, "the dollar volume of such a swindle easily lands in the tens of millions."

As of today, the Visa Supplier Locator database is returning error messages in response to searches.

These codes could easily be reclassified, Forbes says, but an audit could still be conducted by card associations, issuing banks, or the IRS, and any subsequent coding changes might impact the rates that Gravity is currently charging merchants.

The penalty for this type of miscoding, if uncovered during an audit, could result in fines between $1,000 and $10,000 per transaction, according to Forbes. While it is more likely that Gravity Payments would incur these fines, Forbes says that it is also possible that the small-business owners who use Gravity as a processor could be liable.

Related: Dan Price Says Personal Cost of Salary Plan Was Worth It

Gravity, for its part, did not directly respond to Forbes' allegations. However, it did publish a Facebook post in which it noted both the complexities and vagaries of coding in the payments industry.

"There are some situations where businesses overlap between two merchant category codes," Gravity Payments wrote on its page, without citing Forbes. "When this is the case, and neither category code is associated with higher risk activity, Gravity works with the merchant to make sure they are both in the right category code, and the one that will align with business objectives."

"There are also businesses whose primary business is beverages and food," the company continued. "In their case, there are two categories that describe their business equally well (5812 and 5813). In this case, the business should choose the category code that best suits their business."

Forbes initially reached out to Price when he and fellow social justice advocate Michael Nigro proposed to produce a docu-series about Gravity Payments in the wake of Price's now-famous wage hike. While the company initially seemed interested, Forbes and Nigro started having second thoughts as questionable facts about Price's past and business practices came to light -- including a lawsuit by Price's brother, Lucas, that may have precipitated the now-famous wage hike, as well as domestic abuse allegations by Price's ex-wife, Kristie Colón.

Related: The Sad Saga of the $70,000 Minimum Salary Company

Geoff Weiss

Staff Writer. Frequently covers digital media.

Geoff Weiss is a staff writer at who frequently covers digital media.

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