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Thursday, November 5, 2015

Merchants go to court over hidden fees

Two Tennessee-based merchants are taking Mercury Payment Systems and Global Payments Direct Inc. to court in Georgia, accusing the two merchant acquiring companies of adding hidden charges to their monthly billing statements.

Archer's Barbeque, which runs restaurants in Knoxville, Tenn., and WokChow Development, which runs an Asian restaurant in Knoxville, filed suit against the companies in Fulton County (Georgia) Superior Court in October. Both are former customers of the two firms.

Global Payments Direct is incorporated in Texas and operates from offices in Atlanta, as well as Owings Mills, Md. A Dunn & Bradstreet listing noted that the company claims $26.5 million in annual revenues. However, as of this writing, its website, www.globalpaymentdirectinc.com , is nonfunctioning. Mercury is an ISO headquartered in Durango, Colo.

Deja vu

This isn't the first time Mercury has been on the hot seat over pricing policies. Heartland Payment Systems Inc. filed a lawsuit in 2015 against Mercury in the U.S. District Court for the Northern District of California, alleging unfair competition in the form of deceptive trade practices. That suit, which is still pending, asserts that Mercury misleads merchants with promises of cut-rate processing fees, and then falsely inflates those fees with hidden charges. The suit seeks to stop Mercury from using these pricing practices and to require that the company compensate merchants.

"Mercury has wrongfully taken from Heartland by deceptively falsifying pass-through interchange costs and other illegal methods," Heartland said in a statement on the lawsuit. Mercury filed a motion to dismiss Heartland's allegations, but the presiding judge denied that request earlier this year.

Heartland, which lays claim to being first to market with interchange-plus pricing – now a widely used pricing model – argues that Mercury inflates the true cost of interchange when it claims to be using that pricing model. Interchange becomes inflated with hidden and unrelated fees, such as network access and brand usage fees, Heartland maintained in a statement provided to The Green Sheet.

"Heartland believes strongly that when all the facts concerning Mercury's misleading, unlawful practices come to light, we will begin to put an end to falsely inflated interchange billing and other deceptive practices that harm the payment processing industry and our customers," the company said, adding that the filing in Georgia lends credence to its assertions. "Mercury's conduct, which has hurt Heartland, also adversely affects merchants, especially small- to mid-sized businesses," Heartland noted.

Challenging 'junk' fees

The Georgia suit, filed in October 2015, alleges that Mercury and Global have been tacking on charges to merchants accounts that are disguised as pass-through fees required by the networks and issuing banks. It also challenges "junk fees" that were not initially disclosed to merchants, such as an annual data security fee. Merchants who complain about the fees are dissuaded from leaving by early termination fees, the complaint alleges. The complainants want the court to declare these contract provisions unenforceable.

CardFellow, an online marketplace for merchant acquiring services that also advocates for merchants, said in a recent post the arguments against Mercury seem valid. "While we can't speculate on the legality of Mercury Payment Systems' practices, we can confirm that we've seen misleading and deceptive pricing when reviewing Mercury statements for CardFellow clients," CardFellow stated.

Letting merchants know the score

Industry attorney Adam Atlas noted that pricing disputes often arise because merchants typically don't review their billing statements line by line. "The obvious lesson from cases like this is for ISOs to be fastidiously honest in their disclosures to merchants, even if the merchant is unlikely to read all of the disclosure," he said.

Atlas also suggested ISOs be mindful of acquirers and processors they work with to ensure they are not adding fees. "The less obvious lesson is to pause and reflect on whether an ISO could be a defendant on a claim that is triggered by a dishonest processor," he said. "I think there is some risk there, and ISOs should perhaps test the veracity of their processor transactions to see that they are consistent with what the ISO sold to the merchant." end of article

Editor's Note:

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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