Choice Merchant Solutions, Esquire Bank Facing Lawsuit Over Allegedly Excessive, Undisclosed Chargeback Fees

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A proposed class action lawsuit accuses Infinity Capital, LLC and its sponsor bank of assessing excessive “monthly chargeback violation” fees in breach of their merchant contract terms.

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The 19-page breach-of-contract lawsuit was filed by an online business that contracted with the defendants for payment processing services in January 2023. The suit alleges Esquire Bank and Infinity Capital—which does business as Choice Merchant Solutions—breached the plaintiff’s merchant agreement by charging the business “monthly chargeback violation” or “enhanced chargeback” fees that were improperly disclosed and in excess of the amount allowed pursuant to the contract terms.

In order to offer payment processing services, Choice Merchant Solutions and Esquire Bank—a member bank of major credit and debit card brands—must comply with certain rules about fee disclosures in customer agreements. For instance, a merchant contract must include a “separate or distinct fee disclosure” that clearly breaks down the methodology by which each charge is calculated, the complaint explains.

The filing contends that although the plaintiff’s merchant agreement includes a requisite fee schedule that lists a $25 fee per chargeback—which occurs when a cardholder or bank disputes a transaction and requests a reversal of the charge—the list of fees does not mention any other chargeback-related fees, let alone a “monthly chargeback violation” or “enhanced chargeback” fee.

The term “monthly chargeback violation,” despite its absence from the fee schedule, is defined later in the contract’s terms and conditions as a fee that will be assessed when “more than five Chargebacks have been processed in [a] month and … the Transaction Chargeback Ratio for that month is equal to or greater than 1%,” the lawsuit explains.

A table is provided in the agreement to calculate the precise fee that will be assessed upon the occurrence of such a violation, the suit says. The table plainly shows that when a merchant commits a “monthly chargeback violation,” as it is defined under contract, the company will be assessed a fee of up to $100, the case contends.

However, the plaintiff’s April 2023 monthly billing statement reveals that Choice and Esquire Bank assessed chargeback violation fees “far in excess of the amount authorized in the agreement,” the complaint alleges.

The plaintiff claims that based on the table provided in the contract, the total number of chargebacks, and the transaction chargeback ratio in April 2023, the company should have been assessed only a $50 fee. Instead, the monthly billing statement shows a hefty “enhanced chargeback” fee of $4,000, the filing relays.

The case contests that the “enhanced chargeback” fee assessed by Choice and Esquire Bank clearly exceeds the maximum charge allowed under the terms of the merchant agreement.

The lawsuit looks to represent any businesses or entities that have entered into the Choice merchant agreement with Choice Merchant Solutions and Esquire Bank in the United States and which were subsequently assessed “monthly chargeback violation” or “enhanced chargeback” fees by the defendants in any amount and/or in an amount calculated by assessing the fees set forth in the chart in section 15 of the contract on a per chargeback basis, rather than on a monthly basis.

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