sorry it took so long to answer you. i just now noticed this question in the que.
ok, it depends on the type of contract or "agreement" you signed. unfortunately the short answer is probably yes. by the way, you're not alone. this happens a lot, mainly to generate "application fees" and then "cancellation fees" not unlike banks that do loans and mortgages knowing full well you will not be approved but taking the application anyway.
if your business is considered "high risk" (which it sounds like to me) you'll need to work with a special high risk merchant account provider. if you have low processing volume it's tough to find a company that actually wants your account. if you have high monthly volume you should be ok.
i wrote a hub on finding high risk merchant account providers which you can find by checking my list of hubs.
i hope this answer helps you out.