In a settlement approved by Los Angeles County Superior Court Judge Anthony Mohr Thursday August 12, Wells Fargo & Co. has agreed to pay at least $19 million and as much as $34 million to settle claims against the company. The claims represent so-called 'junk fees' charged to merchants between 1999 and 2003. The merchants contend that Wells Fargo routinely charged them fees without proper disclosure beforehand or explanation of the fees when the merchants called for an explanation.
The fees under dispute included charges for such things as entering credit card information by hand, failing to provide an address for a customer when asked to do so or submitting paperwork late. The agreements between merchants and Wells Fargo, said Howard M. Jaffe, the attorney for the complainants, mentioned only the basic charge for processing transactions. There were only vague references, or none at all to fees charged for submission of paperwork after a certain date, or for entering information by hand.
Whenever a merchant didn't swipe a card, or was unable to get the machine to read a swiped card, for instance, and chose to enter the information on the credit card by hand, they were charged a fee. The fees may have been modest on an individual basis, Jaffe pointed out, but they added up to millions for the company.
Wells Fargo countered with a statement that it has “…always made full disclosures to merchants about our billing practices.” The spokesperson for the company went on to state that "The settlement allows us to focus on providing great service to our customers."
While the lawsuit names four small businesses as plaintiffs, the settlement is a class action that will allow as many as 96,000 California businesses to collect damages from Wells Fargo. In order to collect under the terms of the settlement, companies must file claims to collect their share. If an eligible business fails to file a claim, their share of the settlement will go to the businesses that do. Individual claims are expected to be in the range of $300 per business.
The exact terms of the agreement call for Wells Fargo to repay 29% of charges and fees billed to merchants in the earliest part of the 1999-2003 period. In addition, they've agreed to reimburse merchants 19% of fees charged in the middle of the period and 10% for fees charged toward the end, when disclosure practices had improved.
Some fairly large companies, like Ralph's and Safeway supermarket chains, dropped out of the lawsuit early on to join a separate lawsuit being heard in Connecticut which alleges much broader antitrust violations on the part of credit card companies.
15 Aug 2005
