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A 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class action lawsuit, Target tells customers that funds for purchases made with a RedCard are immediately and directly withdrawn from the customer’s checking account.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 $8.2 million class action settlement which would end claims that Target deceptively markets its store debit card.
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100 thoughts onTarget Class Action Says RedCard is Deceptively Marketed
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If everyone would read the disclosures that come with the card when you get it it states the way the money comes out of your account. This is a rediculous law suit. You knew you spent the money just because you don’t see it instantly!! Duh.. I live paycheck to paycheck just like many others but I know it is going to eventually come out of my account.
My beef with the RedCard is I’ve ordered online and complete my order, pick it up, but have found Target charging me a different price than what the order total was or what I approved for the order. when I called the customer service they’d say it was because a tax or recycle fee wasn’t applied when the order was submitted so they tacked it on after the fact when submitting it to my bank. How is that fair or legal???
I got scammed by Target a year ago. And i paid the fees just because i didn’t want the crap going on my credit statements. It wasn’t a huge amount of money- maybe less then a 100$ I paid it just to have a piece of mind. Cancelled the card over a year ago and i just get in the mail that they are charging me a 30$ late fee. but i don’t have an account with them. problem is that i know that they aren’t going to answer their phones or e mails. i’m planning on ignoring it and just fighting it with the credit bureaus if they try to put stuff on my account. Ugh. every other time i’ve been scammed i’ve gotten out of it. this is the only one i’ve ever paid. It’s so incredibly frustrating.
Another problem with the debit redcard is returns. The transaction is handled the same way, so Target has their merchandise back but returns don’t show up in your account for 3-4 days. They will give you cash back, but you have to ask for it and sometimes argue with the cashier. Tonight the cashier did the transaction so quickly that I didn’t even have a chance to tell her and she did not ask. That means Target gets to hold on to my money for days, and that is simply not right. I would like to know if customer service reps are instructed to put it back on the card unless the customer asks. This could potentially be hundreds of thousands of dollars that Target holds on to that does not belong in their bank accounts! I was surprised this isn’t mentioned inn the lawsuit.
I’ve been a Target Red Card customer since 2005. It was my first credit card and I made payments on time every time for over 8 years! At the end of December 2016 I closed one of my back accounts and my autopayments got messed up. That’s understandable. I left on a trip thinking that everything was fine, autopayments were handled/set up again and when I get home, I’ve got three notices, one letting me know my account has been closed, my payment is past due, and that I’ve got lots of late fees because my autopayment was never set up correctly. I got home from my trip last night and called this morning to handle it. Not only was the customer service rep extremely rude and unhelpful, he said there was nothing further he could do for me. Target you should be ashamed of yourselves. This isn’t how you treat your customers!
All comes down to personal finances people…learn how to manage it. We have 2 Target Debit cards and 2 Target Credit cards in our household for over 5 years and we have NEVER had any issues!!!! Get it together and stop blaming Target for your financial irresponsibility!!!!
THATS YOU AND YOUR CARD. THAT DOES NOT SPEAK FOR ANYONE ELSE.
YOU CANT SIT AND SAY YOU HAVE NEVER HAD ISSUES WITH THE RED CARD. YOU ARE A LIAR IF YOU DO. MS. PRIM & PROPER FINANCIER!!!
Please stop your rhetoric Rose. You are so full of crap along with the others on here that say people need to manage better. You have no clue what is going on as to why someone had trouble. Stop looking down your nose at others and try be a decent human!
This is ridiculous. You being bad at managing your personal finances is not Target’s fault. Are you going to sue your electric company next because it took a few days to take the payment out? Your mortgage company or landlord?
Here’s a crazy thought, if you spend X amount of money somewhere, and then two days later you still have X amount of money in your bank account but no transaction has posted from the place you spent it, then you basically don’t have that money anymore. I learned how checks work in 10th grade. ACH is basically an electronic check.
Ignorance is a bliss, those who are supporting the target debit/credit system. Good for you. You are on top of your game. And to each their own. But for those who are middle class, living on an income only substantial enough to support oneself, any saving counts. those 5% savings draw us in. And with a debit card, if they advertise it as a debit card, working like a debit card then they should live up to their words. Otherwise, it is fraudulent, marked as false advertisement. Those cashiers are pitching the red card non stop because it is their job to do so. In a way they are forced to pitch those sales otherwise, they get a verbal talk to about it. Everyday they are pressured into pitching those “red cards” as a results, they will sometimes lie to their customers or not be well educated on the card and give fabricated information. We use debit cards AND credit cards because the transaction will show right away, allowing us to know how much we have used. Checks on the other hands take awhile to process, and we do not include that in our spending until it goes though. Who would want the hassle of using a debit/credit card only to find out that it will take awhile for the transaction to be processed.
I think Target Red Card is horrible. I paid my bill in full with a person on the phone. Then I pulled my credit report it showed me owing them $13.90 For several months it added $1.00 in late fees and I didnt know as I had not used the card. But as far as I can see it had something to do with billing cycle and the amount was under $5.00 but it was billing and adding. So my credit score took a hit for bieng 8 months past due. I had no way of knowing this unless I pulled report. So YES Im a responsible person and that pays there bills and Target is horrible. I have contacted them and Im waiting to hear how this will be rectified. Either way I also feel ripped of by even paying the $13.90 I surely hope the give that back to me. But I will NEVER EVER use a card at tartget. Not worth the 5% I will shop elsewhere.
Ripped me off too.$35 purchase turned into $235 and on my credit report in 3 months.They have a system of not sending a bill out until too late to avoid penalty and interest.Then lie and tell you pay $50 and we will accept that only to go back on it the next day and add more fees and penalties making it $87.Dont send a bill and add more making it now $138.and so on.I did not know the account # so they refused payment 3 times now they want $238++ For a $35 purchase. Now they call threaten harrass yelling at me til I hung up on them.