Payment Gateway Holding Your Funds? Letter of Demand

Your payment gateway froze your funds. Settlement is paused, an open balance is sitting in their account, and the explanation has been vague — “risk review”, “compliance hold”, “elevated chargeback profile”. Customer service cannot give you a date. Meanwhile your payroll, supplier and tax obligations do not pause. You are watching working capital evaporate in real time.

Payment processors operate under contracts that grant broad discretion, but that discretion is not unlimited. Sustained or unjustified holds can breach the contract, breach trade-practices obligations, and in some cases attract regulatory attention from AUSTRAC, ASIC, or the Australian Financial Complaints Authority.

The legal context

Merchant agreements typically allow holds for risk and compliance reasons but require the processor to act reasonably and in good faith. Indefinite or disproportionate holds can constitute breach of contract and, where the processor is a financial services provider, breach of obligations under the ASIC Act and the financial services code. AFCA has jurisdiction over many payment-processing disputes and can order release plus compensation. The unfair-contract-terms regime also applies where the processor’s contract is standard-form and you are a small business.

Common pushbacks and why they fail

• “The terms allow us to hold funds at our discretion.” Discretion must be exercised reasonably; bare reliance on the clause is not enough.
• “Compliance review is ongoing.” Reviews must be conducted within a reasonable time and with genuine inquiry.
• “Chargeback reserve is required.” Reserves must be proportionate to risk; sweeping the entire balance is rarely justified.
• “We cannot disclose details.” Some opacity is permitted, but the merchant must be told enough to respond.

The document and what it does

A Letter of Demand sets out the merchant agreement, the held amount, the duration of the hold, the inadequacy of the explanation, and the contractual and statutory basis for release. It demands release within a defined period and signals the next steps — AFCA complaint, court application, and where appropriate, regulator notification.

What Claim Done delivers

• The merchant agreement and hold history captured precisely
• Citation of contractual good-faith obligations and statutory protections
• Demand for release with a clear deadline
• Escalation path including AFCA, court and regulator routes
• Drafted and sent as a PDF, flat $49

What to expect after

A formal letter tells the processor that you know the AFCA and court routes and are ready to use them. If they hold the line, an AFCA complaint typically follows and is free to lodge.