Credit Card Servicer Hit with Class Action Lawsuit for Deceptive Practices

Credit Card Servicer Hit with Class Action Lawsuit for Deceptive Practices

Posted By Golomb & Honik, P.C. || 3-Nov-2016

CardConnect Corp, a credit card service provider, is now facing a class action lawsuit in Pennsylvania federal court accusing the company of improperly concealing charges that they later imposed on merchants. Michigan restaurant owner and lead plaintiff Teh Shao Kao alleges that the Pennsylvania-based company manipulated the contracts that merchants were required to sign in order to increase payment processing fees. According to the complaint, the company promised merchants low rates in order to lock them into contracts, but then uses a deceptive trick allowing them to jack up the fees.

The complaint states: “Neither CardConnect nor the member bank ever actually ‘accept’ the contracts by signing them — an express condition precedent to their formation. “What results is a state of contractual limbo that gives CardConnect the discretion to disregard agreed-upon rates and charges that it never formally ‘accepted,’ while at the same time purporting to hold merchants to fine print terms that are unfavorable to them.”

According to Mr. Kao, the standard contract that merchants are presented with purportedly integrates a “program guide,” a much larger document of dozens of pages of fine print that most merchants are unlikely to read. Even more problematic is the fact that neither the company’s member bank, Wells Fargo, nor CardConnect, ever signed the contract themselves. Thus, thousands of merchants were being unfairly bound to an invalid contracting system.

Mr. Kao is seeking declaratory and injunctive relief on the grounds that the contracts are not binding. He further seeks damages for breach of contract and unjust enrichment.

The case is Kao et al. v. CardConnect Corp., case number 2:16-cv-05707 in the U.S. District Court for the Eastern District of Pennsylvania. Mr. Kao is represented by Richard M. Golomb and Kenneth J. Grunfeld of Golomb & Honik, P.C. and E. Adam Webb of Webb Klase & Lemond LLC.

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