Credit Card Provider Sued for ‘Deceptive’ Tactics

Heartland Payment Systems, among the largest credit card providers in the U.S., said in a press release that it has filed a federal lawsuit against Mercury Payment Systemsalong with a provider in the U.S.

Based on this release, the lawsuit, which was registered in U.S. District Court in the Northern District of California, accuses Mercury of”false advertising, unfair competition, intentional interference with contractual relations, and intentional interference with prospective economic advantage. The lawsuit alleges that Mercury is competing against Heartland with deceptive trade practices. Heartland contends that Mercury is misleading merchant clients by hiding its surplus profits in the fees charged by credit card networks and their issuing banks.”

Robert Carr, chairman and CEO of Heartland, said in the release,”The deceptive pricing practice of falsely inflating pass-through interchange fees not only represents illegal and unfair competition, additionally, it costs even the tiniest of merchants hundreds, or sometimes even thousands of the hard-earned dollars annually without their awareness. Industry-wide, the cost of deceptive interchange practices runs into tens of millions of dollars, and has caused great damage to the standing of the whole electronic payments industry.”

The release continues,”Today, Mercury and other payment businesses are avoiding interchange and pricing transparency by constructing their markup to what they purport to be interchange fees. In the complaint, Heartland claims that it has reviewed hundreds of monthly statements from Mercury for different merchants throughout the U.S., which indicate that Mercury repeatedly and frequently engages in a practice of charging its clients inflated interchange fees without disclosure. By way of example, rather than charging merchants Visa’s acquirer processor (APF) and MasterCard’s accessibility and brand use (NABU) fees — both less than two cents per transaction — Mercury occasionally charges customers up to almost six cents per transaction without notifying them of their markup.”

Mercury, in its press release, said it”will vigorously defend against the suit.”

Suit May Have Far Reaching Impact

In case you’ve been reading my posts during the last two decades, the kinds of alleged practices mentioned above are not surprising. I’ve addressed the alleged deceptive tactics and pricing problems mentioned in the press release and much more. However, my posts have never concentrated on one specific supplier. The several examples I’ve shown in my posts have come from a range of different providers.

Also, I’m not endorsing or condemning both of the suppliers mentioned in the press release. The main reason I wanted to split the launch is because I feel it could have a far reaching effect in adding desired transparency to a very convoluted and at times misleading industry. Most of all, ultimately it may benefit merchants regardless of which provider they use. I was disappointed that the courts failed to add the needed transparency in the current litigation by merchants against Visa, MasterCard and others — see “$6 Billion Visa, MasterCard Settlement Final; How to Claim.” Perhaps the best way to add such transparency in this business is to have suppliers sue each other. I will adhere to this lawsuit closely. I am interested to see whether there’ll be additional supplier lawsuits to come.

Perhaps the best way to add such transparency in this business is to have suppliers sue each other.

Merchants Still Have to Be Informed

Bear in mind that not all suppliers use misleading tactics. But many will still attempt to obtain as much gain from the merchant as possible. And, in this convoluted sector with countless interchange rates, it’s extremely simple for a merchant to overpay. Merchants must continue to stay informed on the card processing industry due to the financial impact it has on their own bottom-line.

If you believe you’re overpaying or if you’re searching for another supplier, read my 4-part series “How to Lower Credit Card Processing Costs and Obtain superior Terms” before renegotiating with your existing provider or buying new one. The show not only provides the methodology to get a competitive processing cost, but also walks through the verbiage and verification required to make sure the merchant actually receives the pricing he negotiated.

Update on $6 Billion Settlement and Procedure for Filing a Claim

Several merchants have contacted me concerning the claim procedure with this settlement, which, again, I addressed last month. As of this writing, the claim procedure hasn’t yet been finalized. Visit the official site periodically to find out more about the settlement and also how to submit a claim.