new class-action lawsuit against credit card companies has surfaced, and this time fraud is the main issue. Three online retailers are suing Visa USA, MasterCard International, American Express and Discover Financial Services, claiming that the credit card companies profit from Internet fraud and don't do enough to help prevent it.

Attorney Mark Ishman, a member of North Carolina-based The Triangle Law Center, filed the lawsuit on behalf of eGeneral Medical Inc., Howell Automotive and Direct Foreign Exchange PLC, which all operate e-commerce sites. All Internet, telephone and mail order merchants that accept credit cards have been invited to join the class-action suit.

The basic issue in the lawsuit is this: Typically, when a card is swiped through a point-of-sale terminal at a brick-and-mortar retail location, the account number gets compared to fraud-related account numbers in a credit card company's database; if there is a match, the card is denied. This group of Internet retailers wants credit card companies also to be required to notify them in a similar manner of possible fraudulent transactions.

The lawsuit also objects to the chargeback fees e-commerce merchants are required to pay the card companies for reversing a fraudulent transaction, which the merchants say is costly to them since they also lose the sale price of the item, the shipping cost and the merchandise itself on a fraudulent transaction.

The action is pending in the U.S. District Court for the Eastern District of North Carolina. Judge Terrence W. Boyle is presiding. The online merchants seek actual and punitive damages, but no dollar amount has been specified.

In May 2003, Paycom Billing Services, Inc., a processor of credit cards for Internet merchants, filed a multimillion dollar lawsuit against MasterCard International for what Paycom called excessive fees charged to Internet merchants ("Card Associations Face New Actions," The Green Sheet, May 26, 2003, issue 03:05:02).