Cissy and Stephen McComb managed their Italian eatery in Park City, Utah, for over 25 years and had no trouble with security rules of MasterCard and Visa–until they were accused of mishandling information and opening the door to $1.26 million in fraud.
The McCombs, who started Cisero’s in 1985, are currently in a legal fight with the bank that processed their credit charges, and, indirectly, with what they claim are card networks that switch rules without notification, enforce unreasonable one-sided contracts and let money be taken from merchants’ accounts without any evidence of fault.
The McCombs claim that no MasterCard or Visa regulations were violated, that that allegations of a breach in security are false, and that there was no indication of any explicit fraudulent acts. Apparently there was no provable fraud, according to court records, in a case that is thought to be the first legal challenge to penalties assigned by the credit card industry’s security procedures.
It’s rare to see a financial institution or processor suing a merchant. This case is being highlighted because it has the potential to send the message that merchants can stick up for themselves in these relationships and demonstrate that they’re correct and the bigger opponent (the bank) has it wrong.
Park City, once a silver mining town, now it has many ski resorts and hosts the Sundance Film Festival, the largest film festival in the US. Cisero’s restaurant brings in approximately $2 million worth of business annually.
“Merchants essentially live in fear that they will be crushed by the card companies and banks if there’s ever a dispute, and therefore don’t dispute most of these things,” and Mallory B Duncan, general counsel of the National Retail Federation in D.C. He also stated that the McCombs are not the only ones criticizing the payment-card industry (PCI) rules.
When an event such as this occurs, both Visa and MasterCard expect a merchant to foot the bill for an approved forensic examiner to investigate the possibility of such a security breach.
They stated that the McCombs’ computer had collected and held information on the accounts of 8,107 patrons, although the McCombs were unaware of this situation. That was less than the 10,000 limit for a fine to be imposed under Visa’s rules. However, Visa claims that Cisero had data on 32,581 accounts stored on their computer, but Visa was unable to clarify how they had reached that figure.
Documents from the court stated that Visa determined the actual amount of the fraud to be $1.26 million and estimated that Cisero was liable for $1.33 million because of their failure to comply. In court papers the couple stated that the “total pre-cap liability” of the restaurant was placed at $511,513. Eventually, Visa stated that $55,000 was owed by Cisero’s.
“All the different changing numbers based on unknown computations indicate that the process is just a scheme to assess high financial penalties on little merchants,” Cisero’s stated in court papers.
“To survive, restaurants have to be able to take electronic payments from Visa and MasterCard,” they stated in the complaint.
At Cisero’s, accepting customers’ cards is essential. None of the major cards such as MasterCard, Visa and US Bank have ever shown that security has been breached at Cisero’s. Additionally, no card issuer has ever suffered any fraud losses due to a data breach at Cisero’s. This assertion is borne out by the court documents.
Judge Keith Kelly of Park City received a request from the bank to deny a portion of the objections raised by the restaurant. So far, there is no ruling.
If you find yourself in business dispute with a larger opponent, know that there is help available. The quality of one’s legal arguments and their presentation can overcome significant apparent odds. A well-prepared business dispute lawyer can effectively compete against even the largest law offices. Abronson Law attorneys can handle business litigation cases with an efficiency that can be difficult for larger business firms to match.
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