Industry-Wide Trends

Judge Denies Fiserv Motion to Dismiss Credit Union Lawsuit

A major lawsuit against Fiserv moves forward, highlighting risks for businesses tied to large payment processors and restrictive service contracts.

This legal development serves as a warning for any retailer or operator reliant on third-party payment processors and core banking systems. Polam Federal Credit Union is suing Fiserv, alleging the tech giant breached its contract through poor system security and the imposition of unfair early-termination fees. A judge just cleared the path for this lawsuit to proceed, denying Fiserv’s attempt to throw the case out. For merchants, this highlights the hidden risks in long-term technology contracts. The lawsuit claims that Fiserv misrepresented how secure their systems actually were and then used aggressive 'liquidated damages' clauses to trap the credit union in the contract. If you are a business owner using a major payment facilitator, this case underscores the importance of auditing your service level agreements (SLAs). You need to know exactly what happens if your provider fails to keep your data secure or if the technology doesn't perform as advertised. The court's decision to let the case move forward suggests that even major technology providers can be held accountable for high exit fees and system failures. Use this as a prompt to review your own merchant processing agreements for 'poison pill' termination clauses.

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