Junk fee litigation has, until recently, been largely a consumer-facing story: diners, online shoppers, and eventgoers challenging the “service,” “processing,” and “convenience” fees that appear at checkout. A new proposed class action filed in North Carolina turns that narrative around. Specifically, a proposed class of North Carolina businesses recently filed a complaint alleging that their payment processors systematically charged them “junk” fees totaling almost $100 every month.
Merchants have been suing their processors and acquirers over undisclosed or misdescribed fees for decades, typically through breach of contract and unfair trade practices claims. What is new here is the “junk fee” label itself, borrowed from the consumer pricing-transparency movement, and the question it raises: Can the wave of state “total price” and junk fee statutes built for consumer transactions give merchants an additional, and potentially more powerful, tool to challenge the fees their own processors charge them?
What the Complaint Alleges
The North Carolina complaint alleges, on behalf of a group of dental practices and other small businesses, that the payment processors charged monthly recurring “junk fees” labeled as “PCI DSS Compliance,” “Non-PCI Charge,” “Safe-T SMB Fee,” or “Other Fees” without clear disclosures or valid authorizations. Instead, the fees were disclosed in small print in a monthly billing statement titled “News for You.” The complaint alleges that the notices did not constitute a valid contractual amendment or fee disclosure and failed to specify the purpose, duration, and consent requirements for the new charge. The complaint sets forth a cause of action under the North Carolina Unfair and Deceptive Trade Practices Act and adds claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment.
Merchants as Plaintiffs: An Old Fight with a New Statutory Angle
Merchant complaints about processor fee practices are not new. Across cases that span decades, merchants have brought claims alleging fees or fee increases embedded in fine print, delivered through separate program guides, or triggered by negative-option enrollment, asserting breach of contract, good-faith-and-fair-dealing, unjust enrichment, and unfair and deceptive acts and practices (UDAP) theories.
In the past, courts have held that merchants cannot rely on certain state consumer-protection statutes in bringing their claims because those statutes require the challenged conduct to be directed at consumers rather than at other businesses. In Spirit Locker, Inc. v. EVO Direct, LLC, 696 F. Supp. 2d 296 (E.D.N.Y. 2010), for example, the court dismissed a liquor store’s UDAP claim against its processor because New York’s General Business Law Section 349 reached only conduct aimed at non-business consumers, though it allowed an unjust enrichment claim to proceed. The same statute was dismissed on the same ground in Spread Enterprises, Inc. v. First Data Merch. Servs. Corp., 298 F.R.D. 54 (E.D.N.Y. 2014). Breach of contract, not a consumer-style disclosure statute, has therefore long been the default vehicle for merchant fee disputes.
The rise of state “total price” and “junk fee” statutes may change that calculus, particularly when paired with legislative activity in some states to expand consumer protection laws to B2B merchant-processor fee disputes. Most notably, New York’s recently effective FAIR Business Practices Act, which we wrote about here, amended New York General Business Law Section 349 to prohibit “unfair” acts or practices in trade or commerce in addition to “deceptive” ones, and it eliminated the long-standing requirement that the challenged conduct be “consumer-oriented” to state a claim.
Had that amendment been in effect when Spirit Locker and Spread Enterprises were decided, the New York courts might not have dismissed those merchants’ Section 349 claims on the threshold ground that a processor’s conduct toward another business, rather than a consumer, fell outside the statute’s reach. Going forward, merchants asserting New York law claims against their processors may have a more direct statutory route to a UDAP-style theory, without first needing to establish that the challenged fee practices were aimed at consumers rather than other businesses.
The Junk Fee Backdrop
The new North Carolina case is a merchant-side dispute adding the “junk fee” label to fees a processor charges its own business customers.This new case is the latest development in the ongoing evolution of fee and pricing transparency litigation amid the backdrop of an increasingly intense legislative and regulatory focus on how fees are disclosed and their intended purpose.
The FTC’s proposed “Junk Fee Rule” originally would have reached any business offering goods or services and required upfront “Total Price” disclosure while prohibiting misrepresentations about the nature and purpose of fees. The Final Rule, issued in December 2024, was scaled back. The Final Rule required covered businesses to disclose the total price upfront and more prominently than any other pricing information, except for government charges, shipping charges, and optional fees, and revised several definitions. Certain post-purchase contingent fees (such as late fees) were excluded from the upfront price, but the rule did not include any carve-out for dynamic pricing and required that all known mandatory fees be included. The Final Rule also addressed credit card surcharges, specifically requiring them to be included in the Total Price when a credit card payment is mandatory but not when a viable non-card payment option exists. The FTC acknowledged extensive consumer complaints about surprise fees in industries the Final Rule did not cover, including the financial services industry, and stated that businesses in non-covered industries (such as financial services, motor vehicles, delivery apps, restaurants, tax preparation, and healthcare) should disclose unavoidable mandatory fees to avoid the potential of engaging in deceptive conduct. (See our post, Final Rule on Unfair or Deceptive Fees.)
Takeaways for Processors, Banks, and Merchants
Whether the North Carolina plaintiffs ultimately prevail remains to be seen. The more significant development may be the theory itself. For years, disputes over processor fees have largely been litigated as breach of contract cases. This complaint instead seeks to reframe those same fee practices through the lens of “junk fees” and pricing transparency.
As regulators and legislatures continue emphasizing transparent fee disclosures, and as some states expand unfair trade practice laws to business-to-business conduct, processors, acquiring banks, and other payment providers should expect greater scrutiny of recurring merchant fees. Organizations should review how such fees are disclosed and implemented, particularly when introduced after contract formation, to ensure they are clearly authorized and communicated. Recurring merchant fees also may be evaluated through the lens of evolving automatic renewal and negative option principles.
We will continue to monitor price transparency and related merchant and payment processor fee litigation. Organizations seeking guidance on these developments or their potential impact are encouraged to contact the authors.
