Paul Tassin  |  July 1, 2016

Category: Consumer News

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Target-logoA California man says that Target tricks consumers into using a payment method that comes with an unreasonable risk of excessive fees.

Plaintiff James Walters claims that Target deceptively presents its RedCard payment method as an analog to traditional debit cards, when in fact using the card exposes consumers to vastly more expensive penalties and fewer legal protections.

According to the Target class action lawsuit, Target’s RedCard is a house-brand payment method that the retailer offers customers.

Using a RedCard to pay for a Target purchase initiates an electronic transfer of funds from the customer’s associated bank account. In exchange for using the RedCard, Target offers customers a five percent discount on all Target purchases made with the card.

Walters says that Target exploits consumers’ ideas of how debit cards work to get them to use the Target RedCard – which Walters says doesn’t work like traditional debit card at all.

According to the class action lawsuit, Target tells customers that funds for purchases made with a RedCard are immediately and directly withdrawn from the customer’s checking account.

Target also requires customers to pick a unique Personal Identification Number for use with the card. Walters argues that these aspects of the RedCard deceptively encourage customers to think it works like a debit card.

The problem, according to Walters, is that RedCard transactions don’t work like debit card transactions at all. He says that purchases made with a RedCard function are processed over the Automated Clearing House network.

These ACH transactions function more like electronic checks, Walters says. They do not immediately draw funds from the payer’s bank account, causing a delay that he says consumers aren’t expecting.

In addition to the delay inherent in ACH transactions, Walters says Target intentionally delays processing RedCard transactions.

He alleges that to save money on processing fees, Target submits RedCard transactions to the ACH network in massive batches. This batch processing can add several days to the time it takes a single transaction to post to the customer’s account, Walters claims.

This delay increases the chance that a customer’s checking account may become overdrawn by the time the Target transaction posts, Walters says.

Like banks, Target charges its RedCard customers a fee if the transaction is refused. But unlike bank fees, which are regulated by federal law, these Returned Payment Fees are unrestricted.

Walters claims that a single declined RedCard transaction can rack up compounded RPF charges of $100 or more.

In addition to the RPFs, Walters says the customer’s bank may also charge an NSF fee for the declined transaction. Walters adds that while Target’s card agreement warns customers about the possibility of being assessed “overdraft fees,” it makes no mention of the danger of NSF fees.

Walters quotes several customer complaints from Internet forums showing that many who signed-up for and used the RedCard had the mistaken impression – allegedly based on Target’s representations – that the card would work just like a debit card.

Some of these customers say this alleged misrepresentation resulted in their being hit with RPF charges they weren’t expecting.

If certified by the Court, Walters’s proposed Class will include all U.S. consumers who incurred RPF charges by using their Target RedCard within the applicable statute of limitations period.

The plaintiff is asking the court to award damages and restitution of all charges Target has assessed its customers as a result of its alleged deceptive business practices, plus costs and attorneys’ fees.

Walters is represented by attorneys Jeffrey Kaliel of Tycko & Zavareei LLP; and Jeffrey Ostrow and Scott Edelsberg of Kopelowitz Ostrow Ferguson Weiselberg Gilbert.

The Target RedCard Class Action Lawsuit is James Walters v. Target Corp., Case No. 16-cv-1678, in the U.S. District Court for the Southern District of California.

UPDATE: On June 19, 2019, Target debit card holders reached a $8.2 million class action settlement which would end claims that Target deceptively markets its store debit card.

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100 thoughts onTarget Class Action Says RedCard is Deceptively Marketed

  1. Linda says:

    I had overdrafts as well. How can I be a part of this?

  2. Debbie Crowell says:

    This has happened to me, took Target over 8 days to clear my account and of course overdrew my account.

    1. L. Spotts says:

      Exuse me, but if you had the money in there to pay what you owed Target you should have already had that deducted in your own personal checkbook at the time you made the transaction. So why would your acct. be overdrawn? You should know you owed Target the amount recorded in your checkbook (and if u didnt record it, well, heres a lesson learned for you). Just because they didnt draw it out immediately doesnt mean you do not owe it to them. Perhaps u should be a little more cautios and write down every check or transaction u make so u know exactly how much u can spend from ur acct. Just cause someone doesnt take it out right away doesnt mean u get to keep it.

      1. Brenden says:

        I could not have said it better!! I am sitting here reading this article and thinking is this guy stupid?? I use my Target Red card a few times a week, not once have I been hit with fees. I deduct each target trip from my account like the money is not there. SMH

        1. Luanne Strickland says:

          Only yourself is responsible for what you spend….it’s your responsibility to add and subtract?. Seems that everyone is looking for a handout.

        2. Lads says:

          Its all I use bc between Cartwheel and red card some days I Save up to $20. I even use at the starbucks. Have never had an issue as I know its going to pull it and I ensure I have the money in my acct. This suit no differnet than trying to sue someone who cashed a check you couldn’t cover. Lame.

      2. EDNA HERRERA says:

        Thank you. Well said, Mr. Spotts! How can someone blame Target for their own stupidity? You know when you are buying something YOU HAVE TO PAY FOR IT! I have a Target card and never had any problems since I have the good sense to know that it eventually will be deducted from my checking account. Also, there are plenty of brick and mortor stores, and websites, that do not immediately deduct charges, sometimes taking as long as two days. So does this mean you are not liable? This is a perfect example of a pointless lawsuit.

      3. Marlene burris says:

        I have a red card and the lawsuit says the card doesn’t work as a debit card like target says and that’s deceptive.
        Debit card immediately puts a hold on ur account for the amount while the red card is a cross between a credit card and a bullshit debit card. It’s not worth the 5% or the lies they tell about the card. I’m still a card holder but I have chosen to stop shop at target unless necessary.

        1. Marlene burris says:

          Customers or normal folks like mys f doesn’t keep money in checking. They food shop n pay bills then transfer balance to savings. Not having that money put or on hold immediately can cause a problem. That’s what a debit card does and so one can easily occur an overdraft as a result.

  3. Lisa Saldivar says:

    How can I be a part of this@

  4. Lisa Ruffin says:

    This has happened to me a few times as well since they are so slow at processing their transactions. I just had incurred an overdraft fee from my bank because of them. I would like to become a part of this lawsuit as well.

  5. ashley payne says:

    how do i apply?

  6. Tania calderon says:

    How to be a patt

  7. Jessica says:

    how can I be a part?

  8. Crystal Medina says:

    how can we become a part of this lawsuit

    1. Asminda Diaz says:

      Would like to be a part of this.

      1. Top Class Actions says:

        The case is still moving through the courts and has not yet reached a settlement. Claim forms are usually not made available to consumers until after a court approved settlement is reached. We recommend you sign up for a free account at TopClassActions.com and follow the case. We will update the article with any major case developments or settlement news! Setting up a free account with Top Class Actions will allow you to receive instant updates on ANY article that you ‘Follow’ on our website. A link to creating an account may be found here: https://topclassactions.com/signup/. You can then ‘Follow’ the article above, and get notified immediately when we post updates!

  9. Carl says:

    How yo be part?

  10. Chancellor says:

    How to be part?

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