A pair of small businesses have filed a putative class action against Wells Fargo Merchant Services in New York federal court, alleging it misleads customers and charged excessive fees for its credit- and debit-card-processing services. The Plaintiffs, Patti’s Pitas LLC, a shuttered Pennsylvania restaurant, and Queen City Tours, a tour operator in Charlotte, North Carolina, claim Wells Fargo Merchant Services inflates “pass through” costs, increases agreed-upon fees, and imposes new charges without telling new customers about these costs when they sign up – and that it also charges a $500 termination fee if they want to end their services.
The Plaintiffs say hundreds of thousands of merchants have been damaged by Wells Fargo Merchant Services’ alleged wrongful conduct. It’s alleged in the complaint:
As a consequence of defendant’s overbilling policies and practices, plaintiffs and the members of the proposed class have been wrongfully forced to pay unauthorized fees and charges. Defendant has improperly deprived plaintiffs and those similarly situated of significant funds, causing ascertainable monetary losses and damages.
The Defendant is co-owned by Wells Fargo Bank N.A. and First Data Merchant Services Corporation, the suit says.
The complaint claims Wells Fargo Merchant Services dupes customers from the start by making promises it doesn’t intend to keep about its fee structure and periodic charges. Its contractual terms are included in a “massive” 63-page program guide filled with fine print that would take an expert attorney weeks to read and understand, the suit says. Sales reps also tell the Plaintiffs they can cancel without a penalty, even though merchants often have to pay an early termination fee should they seek to cancel within a mandatory three-year period, the complaint says.
Queen City Tours says it negotiated a contract that had no monthly minimum charge, but wound up paying $35 for a “monthly service fee” even if it didn’t have any transaction activity. This Plaintiff was also hit with a $10 statement billing fee after cancelling paper statements, despite a contract footnote saying the fee would be waived if the customer signed up for electronic billing, the complaint says.
Patti’s Pitas says it stopped using Wells Fargo Merchant Services after its business shut down in May of this year – but it was continually charged fees until the owner complained. The complaint says:
Fortunately, by the time the business closed, Wells Fargo’s improper sales practices had already come to light so, when the owner of Patti’s Pitas informed defendant that he had not been told about a three-year term, defendant closed the account without a termination fee. Most of defendant’s customers are not so fortunate, rather they are put to a Hobson’s Choice – pay the early termination fee, usually $500, or accept the overbilling for three years.
Claims in the complaint include breach of contract and breach of the covenant of good faith and fair dealing. The Plaintiffs seek restitution of any improper fees, disgorgement and other damages. The new lawsuit is the latest in a series of actions against Wells Fargo since September 2016, when it agreed to pay $185 million in a settlement with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the Los Angeles City Attorney’s office over the creation of more than 2 million deposit and credit card accounts. It later agreed to a Wells Fargo Merchant Services settlement with customers who allege they suffered financial losses from unauthorized accounts that were opened in their names.
In late July, Wells Fargo said it would reimburse $80 million to approximately 570,000 car loan borrowers who were wrongly charged by the bank for insurance. The latest lawsuit appears to be another chapter involving “dramatic revelations” about Wells Fargo’s business practices. E. Adam Webb of Webb Klase & Lemond LLC, the lawyer for the Plaintiffs, told Law360:
It has become obvious over the past year that Wells Fargo had a corporate culture which emphasized revenue and profit over honorable business practices. In April of 2017, internal reports surfaced that confirmed that this culture had infected the Merchant Services division, which provides the vital service of credit [and] debit card processing to many mom-and-pop businesses. We have now seen evidence of this through the experiences of our clients, who learned the hard way that profit trumps promises at Wells Fargo Merchant Services.
The Plaintiffs are represented by E. Adam Webb of Webb Klase & Lemond LLC. The case is Patti’s Pitas LLC et al. v. Wells Fargo Merchant Services LLC, (case number 1:17-cv-04583) in the U.S. District Court for the Eastern District of New York.
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