Wells Fargo Merchant Services Deceptive Fees and Charges Class Action

Nowadays, even small companies must accept payments via credit and debit cards, which requires the use of a merchant payment processing service. The complaint for this class action alleges that Wells Fargo Merchant Services overcharged merchants for its processing services, adding on fees and charges that were not included in the original agreement between the merchant and Wells Fargo.

The class for this action includes all US customers of Wells Fargo Merchant Services, LLC who paid a fee not authorized in their Merchant Processing Application.

For small businesses, the complaint says, fees for card processing may be the third highest expense, after labor and product costs, and the payment system may involve a number of parties:

• The card issuer, usually a bank, which provides credit cards to customers and charge fees whenever the card is used, typically a percentage of the transaction plus a per-transaction fee (for example, 1.65% of the transaction plus 20 cents).
• The card network, such as Visa or MasterCard, which also charges per-transaction fees and other assessments, depending on the type of transaction.
• The payment processor, in this case First Data Merchant Services, which co-owns Wells Fargo Merchant Services with Wells Fargo Bank, which ensures that the customer’s account is debited and the merchant account is credited.
• The member bank, in this case Wells Fargo Bank, which “sponsors” the payment processor.
• The merchant acquirer, in this case Wells Fargo Merchant Services, which markets the payment processor’s service to merchants, and which gets a percentage of fees from its merchants.

The merchant makes an agreement with the merchant acquirer, agreeing on two types of fees, (a) pass-through fees charged by card issuers and networks that are fixed and simply “pass through” to the merchant, and (b) payment processing fees, charged by the payment processor and merchant acquirer.

These complicated arrangements can make it difficult for merchants to understand what they’re paying to whom. The complaint alleges that Wells Fargo takes advantage of this confusion in making merchants sign a Merchant Processing Applicant but setting forth its full terms in a complicated, 63-page Program Guide that is difficult to understand. According to the complaint, Wells Fargo uses the Program Guide to backtrack from fees and rates that the merchant has approved and to immunize itself from liability, even though many provisions of the Guide are inapplicable or unenforceable under New York state law.

Yet Wells Fargo goes even farther to charge improper fees, the complaint claims, by inflating pass-through costs, increasing agreed-upon fees, and imposing new fees that were not disclosed during the sign-up process. The complaint alleges that Wells Fargo uses a number of means to keep customers from understanding what is going on, such as seizing fees from merchant accounts before the merchants have received billing statements itemizing the fees, using deceptive language to imply that increases were imposed by card networks, or putting charges on later statements. If customers object to these practices and want to terminate the agreement, the complaint says, Wells Fargo reveals hefty early-termination fees that small companies cannot afford.

Article Type: Lawsuit
Topic: Consumer
Tags: Deceptive Business Practices, Deceptive Pricing/Undisclosed Surcharges