Paper Shredding Service Contracts: Read the Fine Print

Paper Shredding Service Contracts: Read the Fine Print

The competition within the document destruction industry can sometimes be called ‘fierce.’  Many companies feel they can win business by being the low-cost provider, and sometimes they do.  Upon realizing they’ve priced the service too cheap, they may choose to raise their prices considerably (to make up for their losses) or they may just get out of the business all together.  Having been in the industry for nearly 30 years, we’ve seen these companies come and go.

Recently, there have been several mergers and acquisitions among paper shredding companies – both small and large.  With these changes, we’ve been notified by many prospects that either 1) their document destruction pricing structure have changed; 2) their service has become worse; or 3) both.

While we are generally accustomed to hearing this – we love it! – we’ve been hearing a lot more about these issues as of late.

The following is an excerpt from an American Dental Association article earlier this summer that pertains to what changes our competitors are making.

A 250 percent increase in price over seven years would probably prompt any business owner to do some investigating.

It certainly gave Dr. Carolyn Romzick pause and led her to do some pretty extensive research into Stericycle, a Lake Forest, Illinois-based medical waste disposal company. She found she wasn’t alone in feeling aggravated and deceived at how the company was doing business.

Dr. Romzick is among a number of dentists from across the country who have contacted the ADA to report escalating fees that were not explicitly stated in their original contracts and contracts that automatically renew with only a small window to cancel before it re-ups for several more years.

For Dr. Romzick, who practices in Farmington Hills, Michigan, it started earlier this year when she received a flier offering pickup for medical waste at a price that intrigued her enough to study her invoices for what she was currently paying.

The new company advertised its price at $60 per pickup, which is typically quarterly in the medical waste business. Dr. Romzick had signed a contract with Stericycle in 2009, so she was curious how this new rate would compare.

In 2009, Dr. Romzick said she was paying Stericycle a monthly charge of $105 — $315 each quarter — to pick up one 28-gallon container that typically wasn’t full. By the first quarter of 2016, Dr. Romzick said her quarterly bill had risen to $1,100: a nearly 250 percent increase from when she originally signed a contract.

“The original contract stated there may be increases related to rising fuel costs or increased fees Stericycle incurred for disposal that they could pass on to the customer,” Dr. Romzick said.

“I figured those kinds of things happen. That’s reasonable. But I think we can all agree that fuel prices have not been consistent since 2009, but somehow my invoices from Stericycle have increased consistently.”

Dr. Romzick said she didn’t keep up with the increasing charges from Stericycle because the amount was debited automatically along with numerous other charges that came through the dental office’s account.

When she turned to the internet to find out more about Stericycle, Dr. Romzick said she was surprised to learn the company was the subject of a number of lawsuits. In October 2015, the Illinois attorney general’s office announced a $26.75 million settlement with Stericycle for allegedly overcharging government entities in several states by millions of dollars, resolving the company’s alleged violations of the U.S. and State False Claims Acts.

The lawsuit alleged that since 2003, Stericycle implemented a plan to charge automatic price increases without giving any notice to its government customers in violation of state and federal false claims laws, according to the statement from the Illinois attorney general’s office.

Stericycle’s automated price increases were purportedly fuel and energy surcharges, but they did not reflect actual increases in fuel and energy costs.

According to the lawsuit, these fraudulent price increases — amounting to 18 percent every nine months — violated prices set in the company’s contracts.

In a separate lawsuit, Hagens Berman, a law firm based in Seattle, filed a class action lawsuit in 2013 against Stericycle alleging that the company misled its customers regarding pricing.

“The first rule: a deal is a deal. Stericycle entered into fixed-price contracts and it was obligated to honor those prices,” according to the lawsuit, which can be viewed at hbsslaw.com/cases/stericycle. “The second rule: tell the truth. Stericycle was obligated to give its customers accurate and complete information about its service contracts and the prices it charged.”

Stericycle did not respond to requests for comment.

Dr. Eugene Kim, of Buena Park, California, is one who doesn’t believe Stericycle held up its end of the deal. He said that he signed a contract with Stericycle in May 2014 that included a three-year term under the assumption he was locking in a rate of $180 for pickup at a minimum of twice per year.

“That’s the purpose of signing a long-term contract: to avoid a future price increase,” Dr. Kim said.

According to Dr. Kim, the contract stated that Stericycle may periodically raise the fee to accommodate a rise in operational cost. Over the next two years, Dr. Kim received quarterly bills for $220, $279, and ultimately $398. The lowest bill he received was for $108 — after Stericycle came by and his office was closed so they did not haul away any waste.

“When I signed the contract, I thought each bill would be $180,” Dr. Kim said. “My staff called Stericycle and they said they raise fees by 18 percent every nine to 12 months.”

In order to be released from his contract, a Stericycle employee told Dr. Kim he would have to pay out the remainder of his contract. His math showed that amount to be $400.

When Stericycle did the math, they told Dr. Kim he would owe $1,777 to be released from the contract.

“I don’t know how this company has been allowed to go on for so many years,” Dr. Kim said.

Dr. Vincent F. Fuschino, of Mechanicville, New York, has been a Stericycle client for nearly 20 years and didn’t realize he had a problem with the company until his son, Dr. Vincent P. Fuschino joined his practice and noticed the bills seemed high.

The father and son ultimately figured out that their bills were increasing by 17 percent every six months — something that was not outlined in their original contract with Stericycle.

Dr. Vincent F. Fuschino said he started out paying Stericycle around $80 a month, which increased to $1,853 a month by the end of this relationship with the company.

He said he called Stericycle to end his business relationship with them, was told he could not terminate his contract and the company threatened to take legal action against him.

Like other dentists who wanted to get out of their contracts, Stericycle told Dr. Fuschino he would have to pay out the contract. He refused and Stericycle ultimately agreed to let him out of his contract without charging him a fee.

The same thing happened to Dr. Nathan Roth in San Francisco. Dr. Roth said he was on a year-to-year contract with Stericycle, noticed his fees were increasing and he wanted to hire another vendor to dispose of his practice’s medical waste.

He called Stericycle to tell them he did not want to renew his contract and was told he electronically signed a longer-term contract to which he was bound. Dr. Roth said he never signed anything but was told if he wanted to cancel the service, he would have to pay hundreds of dollars.

“I would caution ADA members that before they sign anything with Stericycle to read the fine print,” Dr. Roth said. “It’s very underhanded and suspicious in the way they practice their business.”

The ADA offers guidance on the Center for Professional Success on how to navigate contracts containing auto renewal provisions at Success.ADA.org/contract-auto-renew.

The Michigan Dental Association has been cautioning its members with the same message: be careful when it comes to signing contracts.

“Some members are surprised to hear that they can be held to contracts that their staff signed. That’s why it is so important not to delegate this authority to any staff member and to educate your staff that you are the only one who should agree to contracts on behalf of the practice,” said Karen Burgess, executive director of the Michigan Dental Association, which has also received multiple complaints from members about Stericycle.

“As with any contract, it is important to read, understand and seek legal advice if you have any uncertainties, before you sign it. Don’t rely on any verbal explanations that you might hear from a salesperson. And even if you think the contract looks good, be sure to do your due diligence and consider other options.”

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If you read this entire article, perhaps you, too, have been taken advantage of by your paper shredding service.  We’d love to look through an invoice with you to see if you’re getting the best bang for your buck!  Give one of our great information security consultants a shout by filling out our free shredding quote form.  We’ll show you where you can save – but more importantly, we’ll look for ways your company could be more secure!

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