CLASS ACTION LAWSUIT FILED BY MERCHANT CUSTOMERS AGAINST BANK AND CREDIT CARD PROCESSING SERVICER FOR IRS PROCESSING FEES

February 2, 2012 –   Section 6050W of the Internal Revenue Code requires banks and credit card processors to match the names of their merchant customers with their corresponding IRS Tax Identification Numbers (“TIN”) and report this information, along with the amount of annual credit card transactions by the merchant, to the IRS.  The IRS has created a form for this information, known as a Form 1099-K.  Banks and credit card processors assist small businesses with credit card transactions.  Beginning in 2011, banks and credit card processors began charging fees to their merchants for the cost of compliance with the IRS reporting requirements.  Often, these fees are referred to as “IRS Processing Validation Charges” and “IRS Compliance Fees.”   Banks, and their credit card processing servicers, are charging these fees even though the IRS has specifically stated that companies are precluded from collecting fees for the costs of compliance with this IRS reporting requirement.  See http://www.irs.gov/pub/irs-utl/irdm_section_6050w_faqs_7_23_11.pdf.  Moreover, the contracts between these companies and their merchant customers do not provide for the assessment of these fees.  The result is that banks and credit card processing servicers are making millions of dollars on the backs of small businesses as a simple result of new IRS reporting obligations.

Today, a class action lawsuit was filed in Nebraska state court on behalf of all merchants in the United States who were assessed an “IRS Processing Validation Charge” by the largest privately held bank in the United States, FIRST NATIONAL BANK OF OMAHA, and its credit card processing servicer, TRANSCENDENT ONE, INC., from May 1, 2011 through the present.  The class action lawsuit is styled, AMADOR L. CORONA, ATTORNEY AT LAW, individually and on behalf of all other similarly situated persons, Plaintiffs, v. TRANSCENDENT ONE, INC., and FIRST NATIONAL BANK OF OMAHA, Defendants, Case No. CI 12-867, Douglas County, Nebraska.  The class plaintiffs are represented by the law firms of Ewusiak & Roberts, P.A., The Law Offices of Scott E. Schutzman, and Pearson Law Offices.

According to Joel Ewusiak, counsel for the class plaintiffs:  “This is just another example of big companies taking advantage of the little guy:  the small business owners of our country who take credit cards as a form of payment.  This new IRS requirement merely requires merchant service providers to determine an identification number and give it to the IRS.  Aside from the fact that the IRS prohibits these companies from passing off the cost of compliance, the actual cost for the companies to comply is almost certainly less than the roughly $90.00 that First National Bank of Omaha and TranscendentOne are charging each and every one of their roughly 6 million merchant customers on an annual basis.  In fact, it is probably a small fraction of this amount.  This problem exists throughout the credit card processing industry.  Apparently, the philosophy is that if everyone is doing it, it must be okay.  But it’s not.”  For more information about the class action lawsuit, please contact Joel Ewusiak at joel@erlitigators.com or visit, www.erlitigators.com.

Ewusiak & Roberts, P.A. is a Florida law firm focusing in three practice areas:  product defects, investment loss recovery and consumer rights.  For more information, visit www.erlitigators.com.

 

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