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Selling a bank is hard to do and it appears even planning to sell your bank may be made even harder when your core IT supplier manufactures an exit barrier worth hundreds of thousands or even millions of dollars. Millington Bank ($565M assets), a New Jersey savings bank located in the Township of Long Hill, filed a law suit against Fidelity Information Services (FIS) in the Superior Court of New Jersey.

Millington alleges they were coerced to sign a seven-year amendment and extension to their core processing agreement in September 2015 on a "take-it-or-leave-it" basis. Vendors are smart and are trained to wait until their client has less then than 12 months of contract term remaining before they formally approach for renewal talks - thus creating a negotiations advantage because there is little time left to switch if the bank is unhappy.

Similar to the Millington situation, the bank had little time [then] to make a processing change - a process that can take 12 to 18 months - and so they signed FIS' standard form agreement. The complaint states that FIS insisted that "...every bank with whom FIS does business are required to sign this [standard] agreement..." and there was no negotiating option for Millington. Accepting this statement, the bank may have found solace (other bankers signing the same) and then signed anyway.

Fast forward a few years and the bank wishes now to potentially sell, and upon re-examining the addendum, the liquidated damages clause unfairly benefits FIS with termination fees for services that FIS will never actually deliver.  The complaint continues that one of the techniques deployed by FIS to coerce a customer bank into paying liquidated damages despite a dispute as to their legitimacy "...is a tacit or explicit threat to withhold the decommissioning, conversion and integration of data required by the merger or acquisition unless the customer bank commits to making the liquidated damages payments and then makes the payments upon the consummation of the merger." 

Millington finishes the complaint with a demand for the court to rule the termination fees inapplicable, illegal, unenforceable and void.

Fiserv, Fidelity (FIS), and Jack Henry & Associates (JHA) control 85 percent of the core IT services processing for banks with less than $1B in assets and 93% of the market for those above. By any definition, they possess a market oligopoly. 

While nailing down the specific goals of GCC, I quickly concluded that I needed to unionize institutions together into a collective, building an influential voice backed by their large combined contract values.  I also recognized the need to get some real horsepower behind us from a credible firm that knows the IT game at the highest and global levels.

I needed a firm that could look any Core and IT supplier in the eye and cite text-and-verse from the authoritative sources on just about any term, best practice or legal covenant imagined. When I met with Pillsbury LLP, I knew I had found just the team. 

Understandably, bringing in lawyers can be an alarming notion. However, to get the fairest contracts, it’s vital to bring in the experts. By combining forces with Pillsbury, GCC is unstoppable.

Introducing: Bob Zahler and Elizabeth Zimmer 

 The cost, business distraction and uncertain outcomes associated with renegotiating a Core and IT supplier contract can be monumental.

Bankers that go it alone are at a huge disadvantage. Institutions smart enough to retain professional assistance from a company like Paladin fs can do an incrementally better job for their franchise and cost structure by negotiating with information, pricing data and market intelligence in their corner.

Unfortunately, both of these negotiating positions are defensive – you have to do the best with what you have and where you are at that moment. A long and sometimes painful dance ensues - strategizing, maneuvering, threatening and attempting to outsmart the Core IT supplier - all the while knowing that the vendor holds most, if not all the cards.