Square has started keeping 30% of some retailers’ payments at the worst possible time

Square (SQ) He confirmed the practice on Tuesday in a blog post, describing it as a “continuous reserve,” in which the payment company led by Jack Dorsey takes a cut of the seller’s processing volume and releases it “continuously” for up to 120 days .

It is used for what Square labels as “risky sellers,” which are companies that accept prepayment for goods or services that are provided at a future date. Venture sellers also include companies that sell goods or services that are “dispute-prone.” Square said it notifies vendors that they are placed on the show.

“The vast majority of our vendors do not fit this profile,” Square said in the statement. “For the small number of people who do, we establish reserves that allow them to continue processing with Square (rather than going offline, as many financial institutions will), particularly during uncertain times.”

However, according to an investigation by the New York Times, some small businesses are disproportionately affected by the practice, leading to financial problems and layoffs.

In one case, Legal Knock, a company that builds websites for law firms, told the Times that a client never demanded a refund for their work, yet Square kept $ 4,000 in reserve in May. Sean Weber, the owner, said he had trouble contacting the company and was not satisfied with his explanation. He even said that Square blocked it on Twitter.

Square did not immediately respond to a request for comment.

A petition by Square merchants amassed 1,300 signatures. “Small businesses can barely survive as they are, and now that Square, Inc. is withholding funds, many more small businesses will close because of Square,” the petition says.

Square ended its blog post by saying it aims to “be transparent, offer sellers the choice, protect buyers, and provide a better experience with Square,” an explanation many obviously disagree with.