Class Action Lawsuit Filed Against Woodforest National Bank and Merchants’ Choice Payment Solutions Alleging Fraud and Overbilling

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Lawsuit filed by Webb, Klase & Lemond, LLC alleges that Woodforest Bank and Merchants’ Choice induce small businesses to enroll in payment processing contracts by falsely claiming they are affiliated with the businesses’ current payment processors and then bury the businesses with excessive fees.

Atlanta-based law firm Webb, Klase & Lemond, LLC and Houston-based law firm Meade & Neese LLP have filed a class action lawsuit against Woodforest National Bank (“Woodforest Bank”) and its former payment processing affiliate Merchants’ Choice Payment Solutions (“Merchants’ Choice”) alleging they perpetrate a widespread fraudulent scheme of inducing small businesses to enroll in their services through a telephone fraud ring. Merchants’ Choice is one of the largest payment processors in the country, with 70,000 merchants signed up.

The Class Action Complaint states that Woodforest Bank sold Merchants’ Choice for $470 million to Paysafe Group, PLC in August of 2017, but the claims in the lawsuit extend back several years pursuant to the applicable statutes of limitations. The price paid for Merchants’ Choice equaled nearly $7,000 per merchant customer. After the Merchants’ Choice purchase, Paysafe Group, PLC agreed to be purchased by a consortium led by Blackstone Group LP and CVC Capital Partners.

The suit alleges that Woodforest Bank and Merchants’ Choice trained their agents to cold call small businesses and falsely indicate they are affiliated with the businesses’ current payment processor. According to the suit, Defendants’ agents then inform such merchants that they either need to update their equipment to maintain regulatory compliance or need to reapply in order to avoid fee increases. The paperwork which is then sent by Defendants is in reality a new contract with Defendants. The suit alleges such misrepresentations cause businesses to unknowingly enter new contracts, often resulting in businesses paying monthly fees to both Merchants’ Choice and the actual processor for the same service. The suit further alleges that Merchants’ Choice does not even adhere to the payment processing fees referenced in the bogus promotional materials and contracts, but instead charges much higher fees.

The lawsuit describes multiple regulatory enforcement actions against Woodforest Bank and Merchants’ Choice, as well as a Better Business Bureau alert, hundreds of complaints by victims, and a documentary exposé by a business group.

The lawsuit also brings claims for a second class of Merchants’ Choice customers that knowingly signed up for payment processing services. These customers are alleged to have been victims of a bait and switch, pursuant to which promotional materials and contractual documents promised certain rates and fees but Defendants actually charged higher amounts.

The Class Action Complaint alleges that Woodforest Bank and Merchants’ Choice have perpetrated the same schemes across the country and brings causes of action for fraud, misrepresentation, breach of contract, and unjust enrichment.

On behalf of themselves and the class members, the Plaintiffs seek rescission of fraudulently induced contracts and the return of all improper fees paid to the Defendants.

The case, styled Al’s Pals Pet Care, LLC, et al. v. Woodforest National Bank, N.A., et al., is pending in the United States District Court for the Southern District of Texas and has been assigned case number 4:17-cv-03852.

If you wish to discuss this action or have any questions concerning this press release, please contact Webb, Klase & Lemond, LLC at (770) 444-9325 or contact@WebbLLC.com. You may visit the firm website at http://www.WebbLLC.com.

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E. Adam Webb
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