NC merchants cry foul over 'junk fees'

Litigation over junk fees has been historically consumer oriented. A group of North Carolina businesses, however, is trying to turn the narrative around by filing a class action lawsuit alleging their payment processor for routinely assessed junk fees totaling as much as $100 a month.

James Huber, managing partner at Global Legal Law Firm who specializes in payments litigation, is skeptical. "I don't think it has any legs," he said.

Lawyers with the firm Venable give it a slightly better chance, pointing to the "ongoing evolution of fee and pricing transparency litigation" against a backdrop of legislative and regulatory attention to fee disclosures and their intended purposes.

The North Carolina lawsuit was brought by Dr. Robert D. Freedland, DDS, P.A., who is suing Elavon and the ISO Paychex Inc. over allegedly undisclosed and unauthorized fees. The complaint alleges violations of the state's Unfair and Deceptive Trade Practices Act as well as breach of contract.

Fees add up to nearly $100 a month

Freedland filed the lawsuit in state court on behalf of himself and other persons/entities operating card-accepting businesses in the Tar Heel State. It describes as junk fees "PCI DSS Compliance," "Non-PCI Charge," "Safe-T-SMB Fee" and "Other Fees" that combined total about $95 a month, according to a filing in July 2026 in Superior Court for Durham County.

"These recurring junk fees were deceptive, unjustified, and contrary to Defendants' own service agreements and North Carolina law," the lawsuit asserts. "They were assessed to thousands of small businesses statewide who lacked bargaining power or notice." The lawsuit seeks statutory, actual and treble damages as authorized by law, and restitution and disgorgement of all improper fees, as well as attorney fees and costs.

Freedland said his original merchant agreement disclosed ordinary processing and transaction fees applicable to Visa, Mastercard, Discover and JCB, including gateway services, account maintenance and support, hardware and operational fees, and assessment fees, but made no mention of "recurring 'PCI compliance' or 'Safe-T' program charges." Then beginning in 2018 and continuing through 2024, monthly statements reflected a total of $94.99 in other fees, composed of non-PCI and Safe-T fees.

Early in 2023, the lawsuit states, Paychex sent a pre-populated application through DocuSign that listed a PCI fee, which Freedland claims he did not recall signing, and which included a hyperlink to a 51-page document that made no mention of PCI non-compliance fees. "Even if otherwise valid, that agreement does not retroactively authorize defendants' earlier illegal charges," the filing with the court maintains.

Nothing new, except 'junk fee' label

As the law firm Venable explained in an Aug. 6 commentary on the lawsuit, "Merchants have been suing their processors and acquirers over undisclosed and misdescribed fees for decades, typically through unfair trade practices claims. What is new here is the 'junk fee' label itself, borrowed from the consumer pricing-transparency movement."

The question it raises is whether state "total price" and "junk fee" statutes built for consumer transactions can be used by merchants to challenge processor fees.

"Whether the North Carolina plaintiffs ultimately prevail remains to be seen. The more significant development may be the theory itself," Venable wrote. "For years, disputes over processor fees have largely been litigated as breach of contract cases. This complaint instead seeks to reframe those same fee practices through the lens of 'junk fees' and pricing transparency."

The Venable law firm concludes by advising processors and ISOs to review how such fees are disclosed and implemented to ensure they are clearly authorized and communicated.

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