A Thing
The Green SheetGreen Sheet

Thursday, July 26, 2018

Merchants, Wells Fargo to have their day in court

Merchants who filed a class action lawsuit against Wells Fargo & Co. will have their day in court. The U.S. Eastern District Court of New York struck down the defendant's motion to dismiss the case on July 25, 2018, finding plaintiffs' claims to be credible.

Initially filed Aug. 4, 2017, Patti's Pitas LLC and Queen City Tours v. Wells Fargo Merchant Services LLC, cites lack of transparency and unfair fee structures as causes of action. In his decision, Magistrate Judge Gary R. Brown wrote, "Upon review of all of the documents submitted and arguments made at oral argument, it appears, on balance, that plaintiffs have raised sufficient allegations to overcome, at least as to certain representative plaintiffs, the issues raised on this motion."

Plaintiffs allege Wells Fargo Merchant Services misrepresented the nature and amount of its fees, noting that merchants were locked into long-term contracts, with "numerous unanticipated, improper, inflated, and excessive fees." These omissions obscured fees and upcharges, making merchants unable to detect improper charges.

"Denial of motion to dismiss is an important step in the case which will allow us to do discovery," said Adam Webb a partner with Atlanta-based Webb, Klase & Lemond LLC. "We are very confident that discovery will reveal substantial improper conduct by Wells Fargo."

Clubbing baby seals

Attorneys for plaintiffs believe Wells Fargo Merchant Services made more than $200 million per year from unlawful and illicit practices. Their complaint cites a CNN interview with a former Wells Fargo employee, who recounted bizarre sales tactics when he worked at the company from 2011 to 2013. He said it was nearly impossible for a Wells Fargo merchant to get out of a processing agreement. "We used to be told to go out and club the baby seals: mom-pop-shops that had no legal support," he recalled in an interview. "It really was like a shady used car deal."

Counsel for plaintiffs wrote, "Defendant knows that the higher rates and surcharges will be charged for the vast majority of transactions, but deliberately misrepresents, obscures, and hides that critical information from merchants, including at the time merchants enroll and after merchants enroll and the upcharges commence. This is not a small problem but rather causes significant harm on a monthly basis to the majority of Defendant's customers."

Webb said that the more he saw of this case, the more the "massive scope" of the problem became clear. "Wells Fargo Merchant Services has roughly 475,000 customers, mostly mom-and-pop businesses, and nearly all of them have been defrauded in a substantial way," he stated. "How many businesses failed because Wells Fargo Merchant Services stole their profit margin?" 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.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

2024 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
A Thing