Visa Slapped With Class Action Over Zipcar Policy

Law360, Los Angeles (November 04, 2013, 6:21 PM ET) — Visa Inc. was hit with a proposed class action in California federal court on Monday by a cardholder who says the company implemented a policy to refuse promised benefits to those who rented Zipcars because it is “not a car rental company.”

The lawsuit raises allegations that the policy resulted in a breach of Visa’s promise to provide Visa credit cardholders with a benefit known as the Auto Rental Collision Damage Waiver. With the Auto Rental CDW, Visa offers to reimburse cardholders for money owed for damage or theft related to a car rental if the consumer pays with a Visa card and declines the rental company’s collision damage waiver, according to the suit.

The plaintiff says the global payments technology company has a secret policy to decline the benefit to those who rent through Zipcar, because it is a “car share” company.

“While Visa does disclaim certain types of rentals or transactions in its Auto Rental CDW agreement to consumer, Visa fails to make any disclaimer or exclusion for rentals made through Zipcar,” the complaint says. “Regardless of Visa’s internal policy, Zipcar is a car rental company, and thus rentals made through Zipcar are covered by the Auto Rental CDW benefit.”

The lawsuit further says Zipcar customers do not “share” ownership in the cars they rent and have no ownership rights in the vehicles whatsoever.

“For the purposes of the Visa Auto Rental CDW benefit, there is no meaningful distinction between a rental through Zipcar and rentals made through other companies which are covered by the benefit,” the plaintiff’s counsel wrote in the complaint.

Named plaintiff Ron Davis, who used his Visa-branded Alaska Airlines Signature credit card to rent from Zipcar in October 2012 and declined the company’s optional deductible insurance, incurred $721.70 in damage to the rental. Davis then made a timely claim against the Auto Rental CDW benefit for the amount, and Visa declined the coverage and cited its uniform, internal policy considering Zipcar as something other than a rental car company.

As a result, Davis and the potential class members are injured because they have not and will not receive their promised benefit for rentals made through Zipcar, according to the suit.

The suit alleges claims for breach of contract, breach of the covenant of good faith and fair dealing, declaratory relief, and violations of the Consumers Legal Remedies Act, California Civil Code and the Unfair Competition Law, Business and Professions Code.

Davis seeks an order certifying the action as a class action; an order finding Visa has breached the Auto Rental CDW benefit agreement; an order enjoining Visa from continuing the unlawful business practices; an order requiring Visa to consider Zipcar rentals as qualified rental vehicles; and an order requiring Visa to compensate the plaintiffs and the members of the class. He further seeks declaratory relief, statutory prejudgment interest, punitive damages and plaintiffs’ attorneys’ fees and costs of suit.

Charles D. Marshall of Marshall Law Firm, counsel to Davis, said the language of Visa’s Auto Rental Collision Damage Waiver benefit is very broad, but that Visa is attempting to narrow it through an internal policy to exclude Zipcar rentals without informing its customers and without changing the language of its agreement.

“Visa makes a lot of money by enticing cardholders to use to its cards and thus the Visa payment network — the damage collision waiver benefit is one of the ways VISA gets people to do that,” Marshall told Law360 on Monday. “Our client and the proposed class members held up their end of the bargain; now we want Visa to hold up theirs and provide the benefit promised without limiting it through a secret, internal policy. Visa’s policy decision to exclude Zipcar rentals from CDW coverage is simply out of step with its promise.”

Representatives for Visa didn’t immediately return requests for comment on Monday.

Davis is represented by Charles D. Marshall of Marshall Law Firm.

Counsel information for Visa wasn’t immediately available.

The case is Ron Davis v. Visa Inc., case number 3:13-cv-5125, in the United States District Court for the Northern District of California.