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.