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

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…

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