FTC sues FleetCor and its CEO, alleging deceptive fee practices

The Federal Trade Commission has filed a lawsuit against FleetCor Technologies and its CEO Ronald Clarke, alleging they used deceptive practices that defrauded its business customers of hundreds of millions of dollars in fees and false claims about fuel savings.

The lawsuit requests an immediate injunction against FleetCor, a reformation of its contracts and refunds to be paid to its customers for practices that stand in violation of Section 5A of the FTC Act. The lawsuit specifically accuses CEO Ronald Clarke as a defendant stating that he was acting alone or in concert with others at FleetCor to direct and engage in unfair and deceptive acts.

“FleetCor strongly disagrees with FTC’s complaint, which the FTC Commissioners were not unanimous in approving, and believes the FTC’s claims are without merit," FleetCor said in a press statement. "We intend to vigorously defend ourselves against the FTC in court.”

FleetCor stated that the FTC investigation and allegations are directly related to FleetCor’s U.S. direct fuel card business within North America, which generates approximately $600 million annually. It should be noted that the FTC has filed a lawsuit and is not engaged in an investigation.

In FleetCor's press statement responding to the lawsuit, it claims the $600 million in revenue is broken down by FleetCor with approximately 50% derived from card accepting merchants and the remainder from business accounts. Approximately 50% of the revenue from business accounts is risk-related fees such as late fees and finance charges. An additional 20% of customer revenue is transaction fees and the remaining 30% comprises fees related to program administration and optional services.

FleetCor declined to provide further comment to PaymentsSource.

The FTC reported that the vote authorizing the staff to file the complaint was 4-1, with Commissioner Wilson voting no, and Commissioner Philips voting yes but dissenting in part as to the inclusion of Ronald Clarke as an individual defendant.

On page 26 of the lawsuit the FTC claims that FleetCor has charged customers “High Credit Risk Account Fees” or HCRAFs, including a “High Risk Fee” and “Level 2 Pricing Fee” to the tune of $108 million. The FTC claims that FleetCor has charged these fees without notice on a product introduced in 2014.

“Despite whether or not these fees and changes were in the card agreement or notifications were provided, this case may likely trigger an industry-wide change that calls for enhanced card controls that give business owners and drivers greater control over their spend and how fees can be charged to an account," said Richard Crone, principal at Crone Consulting LLC. "Card controls could also enhance an issuer’s ability to provide timely alerts and notifications that could meet the appropriate legal requirements.”

If it turns out that FleetCor charged these fees without giving its customers the proper change in terms (CITs) notifications or was not spelled out in its agreements, then it could deal a severe blow to FleetCor’s case. Crone predicted that much of the upcoming effort spent by lawyers for the FTC and FleetCor will revolve around the agreement terms and notifications.

The argument of the 55-page lawsuit centers on three acts and practices (section nine): “FleetCor has enticed businesses to sign up for its fuel cards by making three main claims: that customers will save money; that the cards provide fraud controls that protect customers from unauthorized transactions; and that the cards have no set-up, transaction, or membership fees, including when used to purchase fuel at any of the thousands of locations nationwide that accept FleetCor fuel cards. Each of these claims is false or unsubstantiated.”

The FTC also claims that after sign-up, FleetCor has charged customers at least hundreds of millions of dollars in unexpected fees. It reports that when customers have called to complain to FleetCor and FleetCor has agreed to remove them, “in many instances FleetCor has begun charging these customers for different fees to make up the difference,” according to the suit.

The FTC also reports that at least tens of thousands of customers have complained about these practices to the company, the government and the Better Business Bureau.