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|Merchants Win $7.25 Billion Credit Card Fee Class Action Settlement|
- Tuesday, 17 July 2012 11:19
Merchants Win $7.25 Billion Credit Card Fee Class Action Settlement
By Sarah Pierce
Visa, MasterCard and 13 of the country’s largest banks have reached the largest antitrust class action lawsuit settlement in history, agreeing to pay up to $7.25 billion to approximately 7 million merchants to settle claims the banks engaged in a price-fixing scheme on credit card transaction fees. Merchants claim in the class action lawsuit that the “interchange fee” – a fee that goes directly from the merchant to the issuing bank – was illegally set by the banks that, until recently, controlled Visa and MasterCard. Retailers alleged the collusion resulted in a monopoly, with merchants forced for years to pay higher and higher fees to process customer credit card transactions, driving up costs for consumers.
Visa, MasterCard and the banks, including JPMorgan Chase, Bank of America, Citibank, Wells Fargo, Capital One, Citigroup, HSBC and other major banks, have agreed to establish a class action lawsuit settlement fund of $6.05 billion to pay merchant claims. In addition, Visa and MasterCard will reduce interchange, or "swipe," fees that would otherwise be paid by merchants on Visa and MasterCard credit card transactions over an eight-month period while the new rules are implemented. The value of these reduced “swipe” fees is estimated at approximately $1.2 billion, and should result in lower prices for consumers.
"This is an historic settlement. In addition to refunding billions of dollars to retailers that paid artificially inflated interchange fees, the reforms will create real price competition, leading to reduced card-acceptance fees for retailers," said one of the principal litigators in the case.
But while the merchant credit card fee class action settlement will pay millions of dollars to retailers, the controversy is far from over. Appeals are anticipated from some retailers who call the deal a “mirage” that doesn’t go far enough.
Tom Robinson, speaking on behalf of the National Association of Convenience Stores, said: "Not only does the proposed settlement fail to introduce competition and transparency, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces."
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, Case No., MD-05-1720 (JG) (JO), Eastern District of New York.
Updated July 17th, 2012
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Last Updated on Thursday, 27 December 2012 11:09