MasterCard sued over Net billing methods

Internet payment firm Paycom Billing Services has filed a lawsuit against MasterCard, alleging the credit card issuer committed fraud when processing merchants' online transactions.

Paycom, which filed its suit in U.S. District Court in Los Angeles on Monday, said MasterCard used its "monopolistic...power to illegally impose fines and penalties in the millions of dollars" when processing merchants' online sales. Paycom is seeking more than $23 million in damages.

Paycom's lawsuit comes on the heels of a $1 billion settlement MasterCard reached earlier this month with Wal-Mart and Sears, Roebuck over allegations the credit card giant added excessive fees to debit card transactions.

"We understand we're not a brick-and-mortar merchant, and we understand online payments are a different type of transaction than one in person," said Chris Mallick, Paycom's chief executive. "But what we don't understand is the charge backs to Paycom."

In the lawsuit, Paycom said MasterCard charges Internet merchants transaction fees much higher than those charged to traditional retailers, where customers pay with cash or checks.

"MasterCard attempts to justify this difference by arguing that Internet merchants like Paycom are more prone to fraud, but as the District Court established in USA vs. Visa, this explanation is belied by the fact that Paycom and other Internet merchants...bear virtually all risk of loss from fraudulent transactions," the suit stated.

MasterCard said that the suit is without merit and the company's rules are meant to "protect merchants by requiring that the (customer) promptly pay its merchant for all MasterCard transactions and by affording certain protections against bogus cardholder complaints."

Meanwhile, Paycom has received inquiries from more than 24 online merchants and attorneys about filing their own lawsuits or joining Paycom for a class-action suit.

"Net billing" Why would there be a problem?

Banks are not interested in fixing the problem, even more "they" don't have the problem. Merchants not only take all the risk for the fraud that is so prevalent in todays e-commerce, they have to pay for the privilege. Our E-commerce outlet, Australian <a class="jive-link-external" href="http://centre.net.au" target="_newWindow">http://centre.net.au</a> used to pay 2% per transaction (not even automatic payment gateway, that would be more), so on $2000 sale transaction we pay $40.00 to the Card Issuer, so far all electronic transaction. When the real owner complains about transaction, the bank takes the money back without giving $40 back, that's gone into the "black hole", and even if there are no other fees or charges (but there are) that's a fair-a-bit of money. We did not have a lot of the charge-backs, and have have survived not by might of the banks, but the the hand of Almighty.
Now multiply the annual fraud in 2001 of 20 billion dollars in Australia alone by an average of 2% transaction fee not including penalties, that gives the Card Issuer (read the bank) clear profit of $400,000,000!!! Four hundred billion dollars.

Why would there be a problem?
Why should they fix the cow that still gives milk.
Hope this will change when more and more companies sue the banks, even if the small amount of 23 million dollars is like a drop in the ocean.

B.B.