MANHATTAN (CN) - In a federal class action, small businesses accuse purveyors of merchant credit-card services and credit-card swiping machines of brazen frauds, through forgery, lies and altered contracts, which cost businesses thousands of dollars in hidden fees.
Merchant card services enable businesses to accept and process credit and debit card payments. Typically such businesses lease, or less commonly, buy the card-swiping machines.
Lease Finance Group and Northern Leasing Systems are the lead defendants.
Named plaintiffs Sarah Teague, a chiropractor, and retailers Robert Avila, owner of Constantine Creations, and Machelle Schomaker, owner of Thing-A-Ma-Jigs, accuse the independent sales organizations that lease the machines of fraud, conversion, unjust enrichment, breach of contract and other violations.
These include "willfully orchestrating false representations about potential savings in transaction costs, fraudulently altering signed contracts purportedly entered into by businesses for such services, wrongfully taking unauthorized fees and other charges from banks accounts, charging exorbitant and unconscionable rates for the leasing of credit card machines, and failing to notify customers of their practices."
The plaintiffs say that to get their signatures on lease contracts, the defendants falsely promise small business operators low transaction fees for processing services.
But after the business owners sign the agreements, the defendants "alter the contract by adding pages that were never shown to the applicants and by filling in blank areas with new terms," the plaintiffs say. "These newly added pages and terms include purported provisions for early termination fees, liquidated damages, liability limitations, arbitration clauses, and choice-of-law and choice-of-forum provisions.
"Sometimes, defendants go so far as to forge the initials or signatures of small business owners on the newly added pages or filled in areas."
The plaintiffs add: "the altered contracts contain unconscionable provisions, including long-term leases that require small business owner to pay wildly inflated monthly rental fees for credit card processing terminals and inflated early-termination fees, and require small business owners to personally guarantee the contracts. The contracts also authorize defendants to debt payments purportedly due under the agreements directly from the consumer's bank account.
"Once class members' signatures are obtained (or fraudulently inserted through electronic or written forgery), defendants electronically debit class members' bank accounts for the higher-than-disclosed processing rates, inflated rental fees, and other unauthorized charges."
Named as defendants are Lease Finance Group LLC; Northern Leasing Systems Inc.; Lease Source - LSI, LLC; Lease Source Inc.; MBF Leasing LLC; Jay Cohen; Leonard Mezei; Sara Krieger; Encore Payment Systems LLC; Merchant Services Inc.; Universal Merchant Services LLC; Jason Moore; and Trans Tech Merchant Group
The plaintiffs seek restitution, disgorgement, an injunction and class damages for consumer fraud, false advertising in violation, common law fraud, unjust enrichment, deceit, fraud and misrepresentation, negligent misrepresentation, conversion and breach of contact.
Their lead counsel is Krishnan Chittur with Chittur & Associates.
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