‘Fee-Free’ Card Processor Charges Monthly Fees, Suit Claims

Law360, New York (March 28, 2017, 2:23 PM EDT) — A San Diego man accused credit card processor North American Bancard LLC of charging fees associated for its PayAnywhere service, despite promising customers that the service does not charge fees, in a proposed class action suit filed on Monday in California federal court.

PayAnywhere user Gerald McGhee alleges that despite promotional materials that indicate the service charges users only a percentage of each transaction, North American Bancard charged him monthly fees for using its card reader. McGhee claims that the company began deducting fees from his bank account in December 2015 even though he never used the reader, continued to charge him for several months and refused his requests to refund the money.

“North American Bancard engaged in negligent misrepresentation, fraudulent concealment and intentional misrepresentation,” the complaint alleges. “They also breached the covenant of good faith and fair dealing inherent in every agreement.”

According the the complaint, Gerald McGhee first acquired a PayAnywhere card reader in November 2014 after being contacted by a salesperson who he says assured him there would be no fees associated with it. McGhee alleges that a monthly fee was deducted from his bank account every month between December 2015 and April 2016 despite promises he would be responsible only for a chunk of each transaction.

He also alleges that this continued even after he requested that North American Bancard cease deducting fees and refund the money it had already charged. He seeks to represent all North American Bancard customers charged fees in the U.S.

On the PayAnywhere website, the company advertises, as of Tuesday, that its service involves “no setup, monthly or hidden fees.” In its list of products, PayAnywhere advertises two products that promise not to include fees and one that carries with it a monthly fee. The complaint does not specify which card reader McGhee was sent.

A post on the PayAnywhere blog from December of 2015 indicates that the company would begin charging “inactivity fees” of $3.99 per month for accounts that have not used the card reader in the past 12 months.

The complaint accuses North American Bancard of negligent misrepresentation, fraudulent concealment, intentional misrepresentation, breach of the implied covenant of good faith and fair dealing, restitution/unjust enrichment and violations of California law.

The suit seeks the recovery of all funds that customers were allegedly charged in violation of the “no fee” promise, as well as statutory and punitive damages and attorneys’ fees. It also seeks an injunction requiring North American Bancard to cease its allegedly misleading business practices and to notify customers who might be entitled to refunds.

North American Bancard is headquartered in Troy, Michigan, and states on its website that it processes more than $34 billion annually for more than 250,000 merchants across the U.S. PayAnywhere was launched in 2011 and was rolled out nationwide in 2012.

A representative for North American Bancard declined to comment on Tuesday.

An attorney for McGhee, Eric LaGuardia, told Law360 on Tuesday, “Class actions are one of the only mechanisms through which large companies can be held to account for taking money from a large number of consumers,” and noted that it is very easy for big companies to improperly charge large numbers of people small amounts of money without repercussions.

Gerald McGhee is represented by Craig M. Nicholas, Alex Tomasevic and Shaun Markley of Nicholas & Tomasevic LLP, and Eric A. LaGuardia of LaGuardia Law.

Counsel information for North American Bancard was not immediately available on Tuesday.

The case is Gerald McGhee et al. v. North American Bancard LLC, case number 3:17-cv-00586, in the U.S. District Court for the Southern District of California.

–Editing by Stephen Berg.

“This article is from Law360”


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