CardConnect Deceptive Credit Card Processing and Unauthorized Fees Class Action

Most merchants nowadays must accept credit cards, but the merchant services payment system is complex. The fees are significant; they can be the third-highest expense (after labor and product costs). Busy proprietors often have difficulty understanding all the different parts of the system, and that allows unscrupulous companies to take advantage. According to the complaint for this class action, that’s what CardConnect has done, with deceptive contracts, unauthorized fees, and harsh termination requirements.

The class for this action is all US persons or entities charged unauthorized amounts for payment processing services by CardConnect, during the appropriate statute of limitations.

The first complication in the credit card payment system is that it includes many parties: the bank that issued the card to the customer (such as Citibank or Wells Fargo); the card association (such as Visa or MasterCard); the card association member bank; the payment processing company; the company that sells or leases payment processing equipment to the merchant; the merchant acquirer that provides merchant services (like monthly billing); and the ISO or independent sales organization that enrolls the merchant in the system.

CardConnect is both a merchant acquirer and an ISO, that is, a seller of these services to merchants.

The ISOs must be able to explain contracts clearly, because the number of parties involved makes it difficult for merchants to understand exactly what they will be paying. Also, contracts are often long-term, and either cannot be cancelled or impose high fees for cancellation.

According to the complaint, CardConnect doesn’t explain things clearly, and it employs deceptive means so that merchants end up paying more than they thought. The complaint alleges, for example, that CardConnect negotiates an agreement with the merchant for low rates and fees that is set forth in a contract (the Merchant Processing Application), but incorporates in the contract the terms of a second, non-negotiable agreement (the Program Guide) with many pages of fine print that allow it to raise or add fees if it wants to.

The complaint also claims that neither CardConnect nor the member bank actually sign the contracts, leaving CardConnect the excuse that it didn’t actually “accept” the contract, while the merchant, who did sign, is bound to whatever terms CardConnect wants to impose. In fact, the complaint claims that when CardConnect imposes new fees, it sometimes removes the payment for them from the merchant’s bank account before the merchant has even learned about them.

The complaint alleges that this violates not only the contract but also the requirement for good faith and fair dealing and provides unjust enrichment for CardConnect. 

Article Type: Lawsuit
Topic: Consumer
Tags: Charging More Than Contract Specifies, Deceptive Business Practices, Deceptive Pricing/Undisclosed Surcharges