Wells Fargo Accused Of Overcharging Small Businesses

Image courtesy of Taber Andrew Bain

The scandals and accusations continue to mount for Wells Fargo. This time, the banking giant is being accused of overcharging small businesses to process credit card transactions.

In a potential class action filed earlier this month in a New York federal court, a restaurant owner from Pennsylvania and a North Carolina tour company allege that Wells Fargo’s Merchant Business Services operates an “overbilling scheme” that charged excessive and undisclosed credit card processing fees, along with “massive early termination fees” the merchants tried to end their relationships with the bank.

According to the lawsuit [PDF], Wells misled prospective customers about the fees they would be charged for the card-processing service.

The suit claims that Wells’ 63-page Merchant Processing Application allegedly included “voluminous legalese that could not possibly be read in its entirety or understood by merchant customers” and included “absurd provisions” in the fine print that allowed the bank to charge merchants whatever it wanted in terms of fees.

For example, the suit claims that the Program Guide included language that dictated Wells Fargo could “increase our fees and add new fees for services for any other reason at any time, by notifying you thirty days prior to the effective date of any such change or addition.”

“Boiled down to its core, this provision purports to give Merchant Services unlimited discretion to charge whatever it wants even if such fees and rates are vastly different and higher than those that are clearly set forth in the application,” the suit states.

Because of this provision, Wells Fargo was able to charge companies for a range of fees that had not previously been disclosed, included minimum transactions fees and early termination penalties, the plaintiffs contend.

Queen City Tours & Minimum Fees

In the case of Queen City Tours, which began using Wells’ payment processing service in Oct. 2015, the bank allegedly failed to honor the fee structure it had promised the North Carolina tour company.

The suit claims that Queen City Tours negotiated a contract with no monthly minimum charges, as the business operates on a seasonal basis and had few sales during certain months of the year.

The company’s contract notes this as: “monthly minimum processing fee: $0.00 per month.”

Despite this, in each month when Queen City had no transaction activity, Wells Fargo assessed a minimum fee. This charge began at $35, but was lowered to $20 after Queen City complained.

Additionally, Queen City claims that Wells charged it a “statement billing fee” of $10/month. Wells’ contract notes that this fee can be waived if the client elects to access the monthly statement online. Queen City contends that it promptly requested electronic statements. While the business began receiving electronic statements, on numerous occasions it was assessed the $10 statement billing fee, the suit alleges.

Patti’s Pita & Back Billing

In the case of Pennsylvania-based Patti’s Pitas, the restaurant claims that Wells Fargo charged it with “exponentially more fees” that were not outlined in the fee schedule or program guide. These fees, the suit notes, often totaled hundred of dollars each month.

In one instance, Patti’s Pitas claims that Wells Fargo used a “back-billing” system to charge the company fees for transactions that had taken place the prior month. This, the suit claims, was done with the intention to “confound and confuse merchants.”

“In this way, it is very difficult for merchants to determine how much they are actually being charged for Defendant’s services,” the lawsuit states, noting that in any given month Patti’s was charged 30 or more “bill-back” fees totaling more than $100.

“This outlier program is designed to deceive customers and keep them silent as to improper fees,” the suit states.

Patti’s stopped using Wells Fargo’s services when it went out of business in May 2017. Despite this, the company continued to receive bills and fees for the now-unused service.

The restaurant owner claims that he was told by a Wells Fargo rep that the term of his contract was for three years and that he could not quit, despite no longer having a business.

The lawsuit contends that Patti’s was never informed of the three-year term. After informing Wells Fargo of this, the company waived its $500 early termination fee.

“Most of Defendant’s customers are not so fortunate, rather they are put to a Hobson’s Choice – pay the early termination fee (usually $500) or accept the overbilling for three years,” the suit states.

Such was the case for Queen City Tours. That company claims that after “wasting dozens of hours on the phone” with Wells Fargo, it decided to end its relationship. However, after being informed of the $500 termination penalty, Queen City says it resigned itself to paying the improper monthly minimum fee of $20 until its contract ended.

The lawsuit claims that the fees assessed to Queen City and Patti’s Pitas were improper and unauthorized. As such, Wells Fargo “has improperly deprived Plaintiffs and those similarly situated of significant funds, causing ascertainable monetary losses and damages.”

With the lawsuit, the businesses seek the return of all improper fees and unspecified damages.

Wells Fargo tells Consumerist in a statement that the company denies the lawsuit’s allegations.

“Wells Fargo Merchant Services has long been committed to delivering convenient and efficient payment processing to merchants of all sizes so they can focus on running their businesses. We believe our negotiated pricing terms are fair and were administered appropriately. We deny these claims and intend to defend against the lawsuit,” a rep for the company tells Consumerist.

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