Merchant Services Direct LLC, a young Spokane Valley-based company that specializes in electronic payment processing services, was ranked 237th on a list of the 500 fastest-growing privately-held companies in the U.S. on a list published in August by Inc. Magazine.

The company, however, has experienced some bumps in the road as it headed toward that marker of success, including a number of customer complaints filed with the Spokane-based office of the Better Business Bureau Serving Eastern Washington, North Idaho, and Montana.

Business partners and Merchant Services Direct's co-owners Kyle Dove, 25, and Shane Hurley, 26, founded the company here in late 2007, and since then say they have seen their sales exponentially increase.

For the first three quarters of 2011, the company's sales totaled $3 million, up substantially from $1.2 million in revenue during the year-earlier period, says Hurley, who serves as Merchant Services Direct's CEO.

The company also has expanded its reach into several other U.S. cities in the last year and has plans to open more branch offices in the future, with some debuting at the beginning of next year, its two owners say.

Merchant Services Direct's rapid growth hasn't been without some unhappy clients, however. As of Nov. 11, the Better Business Bureau's website showed that company had a total of 23 customer complaints filed against it in the last three years.

Seventeen of those complaints show to have been resolved with assistance from the BBB. For six other complaints, the BBB found that the business made a good faith effort to resolve the issue, but the customer still was not satisfied with the business's response.

Hurley says that while he personally doesn't handle the resolution of such complaints against the company, he is aware of them. He says the company tries to satisfy customers who have filed such complaints or have an issue with the company's services.

"When you sign 1,000 new customers, you might have some unhappy ones," Hurley says. "Merchant services get a bad rap as an industry, and you get a lot of complaints."

He adds, "We have been fortunate as a company. We have friends (in the industry) with different business models and they deal with 30 to 40 complaints a month."

The three most recent complaints against Merchant Services Direct were filed with the BBB office here in late October, and the agency's website shows that two were resolved with the agency's assistance. One was attempted to be resolved but the customer wasn't fully satisfied with that attempt.

Merchant Services Direct sells to businesses of any size the electronic processing services for transactions that are paid for by a debit or credit card, as well as the point-of-sale equipment that is needed to process such sales. Those transaction processing services involve the communication between the merchant's point-of-sale system and a customer's bank to electronically transfer the funds from the customer's account to the merchant.

In addition to credit and debit card payment processing, Merchant Services Direct also provides payment processing services for electronic checks, online payments, payments made via a smartphone application, and ATM transactions.

Merchant Services Direct currently is headquartered in an office building at 9219 E. Montgomery, where it's leasing a combined total of about 2,500 square feet of floor space in three separately located suites.

To accommodate its rapid growth, Dove and Hurley recently purchased a 10,000-square-foot building at 621 N. Argonne that they plan to move the company into before the end of this year.

Merchant Services Direct is to occupy 5,000 square feet of that building and will lease the rest of the building to two established tenants, Dove says.

Dove says the company employs just fewer than 40 people here, with a total of 300 people companywide, most of whom are contracted sales agents.

Some of Merchant Services Direct's Spokane-area customers include Pizza Rita Inc., McVay Bros. Contractors Inc., and Baldwin Sign Inc., the owners say.

Hurley and Dove assert their company's success is due to the low rates they charge their customers to electronically process payments. The two contend that those fees are between 20 percent and 30 percent less than their competitors' rates.

Dove, who is the company's president of sales, says Merchant Services Direct charges its customers half of a percent of a total transaction amount, plus 10 cents per transaction.

According to the BBB's website, Merchant Services Direct is one of seven similar-sized companies in Eastern Washington, North Idaho, and Montana that offers services in the area of electronic transaction processing.

Compared with its six competitors, which aren't named on the BBB's online industry comparison chart, Merchant Services Direct has received the most complaints in the past 36 months.

Four similar businesses each had between one and four complaints filed against them in the past 36 months, and two other competitors received no complaints in that same time period, the BBB's site shows.

Information listed on the industry comparison chart doesn't account for the length of time a business has been operational, the BBB site says. There's also no known industry standard for the number of complaints a business can expect, and the agency says that the volume of business and the number of transactions may have a bearing on the number of complaints received by the BBB.

Reasons for the filings against Merchant Services Direct in the last three years are listed as problems with product or service, advertising or sales issues, and billing and collections issues.

The most common issue, with 14 complaints filed, is categorized as problems with products or services, followed by eight complaints related to advertising or sales issues.

There also are two publicly-viewable customer reviews of the company posted on the BBB's website—both which occurred this year, on Aug. 25 and Oct. 19—that describe customers' negative experiences. The option to post a public review of a business is a feature being test-piloted by the Spokane-based BBB office and several of the agency's other branches nationwide that launched earlier this year.

The local office's site also shows that Merchant Services Direct currently has a C rating and isn't BBB accredited.

Businesses are rated based on 16 factors, which include such things as the type of business, length of time in operation, and complaint volume. They are under no obligation to seek accreditation from the BBB, but to become accredited, a business must apply and be found by the agency to meet certain accreditation standards, which includes a commitment to make a good faith effort to resolve consumer complaints, the site says.

Despite Merchant Services Direct's encounters with some unhappy clients, Hurley and Dove are focusing on the positive experiences they've had in turning what started out as a two-man venture into a company with a national presence.

The two say that around the start of 2012, they plan to open four new branches of the company in Salt Lake City; Houston; Orlando, Fla.; and Tempe, Ariz.

Once those offices are open, Hurley and Dove say that the company will have a total of 12 offices across the U.S., including its headquarters here.

Its other sales offices are located in San Diego; Denver; Dallas; New York City; Daytona Beach, Fla.; Portland, Ore.; and just outside of Chicago, Hurley says.

The company's business model for opening its branch sales offices is to train managers to oversee those offices at its headquarters here, Dove and Hurley say, and then to transfer a manager to the city in which the company plans to open a new branch.

Dove says that Merchant Services Direct is making the initial investment to start up its other national sales offices. He adds that the managers of each location then enter into an agreement to repay Merchant Services Direct for those startup costs and to become the branch's owner.

While Dove says those agreements follow a similar business model as a franchise, Merchant Services Direct doesn't consider its branch locations to be franchises, but as independent sales offices. The owners of each sales office and their employees' salaries are paid for by the revenues that come from the customer accounts each office signs, Dove says. Each of its branch offices is selling the same processing services, he says.

"It's an extremely competitive business and there are a lot of guys going out there and trying to do it," Hurley says.

Hurley and Dove—both Spokane natives—say they became entrepreneurs right out of high school, and that at one point they each ran separate payment processing businesses here that competed against each other.

Hurley says his business background is in car sales, selling Amway products online, and investing in real estate. When he was 20 years old, he says he was recruited by a sales agent at a now nonexistent payment-processing company here, called Capital Merchants. During his brief stint with that business, Hurley says he met Dove, and adds that neither of them stayed with Capital Merchants for long.

In 2006, Hurley formed his own payment processing businesses called World Wide Solutions, while around the same time Dove formed a similar business here called Dove Enterprises. The two agreed in late 2007 to merge their businesses to form Merchant Services Direct.

Aside from that venture, Dove and Hurley also recently established a real estate investment company earlier this year, called Generation Y Investments LLC.