Credit Card Provider Sued for ‘Deceptive’ Tactics

Heartland Payment Systems, one of the largest credit card providers in the U.S., stated in a press release that it has filed a federal lawsuit against Mercury Payment Systems, also a provider in the U.S.

According to the release, the suit, which was filed 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 suit alleges that Mercury is illegally competing against Heartland with deceptive trade practices. Heartland contends that Mercury is misleading merchant customers by deceptively hiding its excess profits in the interchange fees charged by credit card networks and their issuing banks.”

Robert Carr, chairman and CEO of Heartland, stated in the release, “The deceptive pricing practice of falsely inflating pass-through interchange fees not only constitutes unfair and illegal competition, it also costs even the smallest of merchants hundreds, or sometimes even thousands of their hard-earned dollars each year without their awareness. Industry-wide, the cost of deceptive interchange practices runs into tens of millions of dollars, and has caused great harm to the reputation of the entire electronic payments industry.”

The release continues, “Today, Mercury and other payment companies are avoiding interchange plus pricing transparency by building their markup into what they purport to be interchange fees. In the complaint, Heartland states that it has reviewed hundreds of monthly statements from Mercury for different merchants throughout the U.S., which indicate that Mercury repeatedly and regularly engages in a practice of charging its customers inflated interchange fees without disclosure. For example, instead of charging merchants Visa’s acquirer processor (APF) and MasterCard’s access and brand usage (NABU) fees — both less than two cents per transaction — Mercury sometimes charges customers up to nearly six cents per transaction without informing them of the markup.”

Mercury, in its own press release, said it “will vigorously defend against the lawsuit.”

Suit May Have Far Reaching Impact

If you have been reading my articles over the last two years, the types of alleged practices mentioned above are probably not surprising. I have addressed the alleged misleading tactics and pricing issues mentioned in the press release and more. However, my articles have never focused on one specific provider. The numerous examples I have shown in my articles have come from a number of different providers.

Also, I am not endorsing or condemning either of the providers mentioned in the press release. The main reason I wanted to share the release is because I believe it could have a far reaching impact in adding needed transparency to a very convoluted and sometimes misleading industry. Most importantly, in the end it may benefit merchants no matter which provider they use. I was disappointed that the courts did not add the needed transparency in the recent lawsuit by merchants against Visa, MasterCard and others — see “$6 Billion Visa, MasterCard Settlement Final; How to Claim.” Perhaps the way to add such transparency in this industry is to have providers sue each other. I will follow this lawsuit closely. I’m interested to see if there will be additional provider lawsuits to come.

Perhaps the way to add such transparency in this industry is to have providers sue each other.

Merchants Still Need to be Informed

Keep in mind that not all providers use misleading tactics. However, many will still try to obtain as much profit from the merchant as possible. And, in this convoluted industry with hundreds of interchange rates, it is very easy for a merchant to overpay. Merchants must continue to keep informed on the card processing industry because of the financial impact it has on their bottom-line.

If you believe you are overpaying or if you are looking for another provider, read my 4-part series “How to Lower Credit Card Processing Costs and Obtain Better Terms” before renegotiating with your current provider or seeking a new one. The series not only provides the methodology to obtain a competitive processing cost, but also walks through the verbiage and verification needed to ensure the merchant actually gets the pricing he negotiated.

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

Several merchants have contacted me regarding the claim process for this settlement, which, again, I addressed last month. As of this writing, the claim process has not yet been finalized. Visit the official website periodically to learn more about the settlement and how to file a claim.

Phil Hinke
Phil Hinke
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