Thread: Visa, MasterCard and banks to pay up to $7.25 billion in ‘card-swiping’ settlement

CX Matiash/AP - Americans stepped up their borrowing in May, helped by the largest one-month gain in credit card debt in more than four years. But overall credit card use is still well below where it was just before the Great Recession began.



By Ylan Q. Mui and Amrita Jayakumar, Published: July 13

Visa, MasterCard and several of the nation’s largest banks have agreed to pay as much as $7.25 billion to settle retailers’ complaints over the fees they are charged each time a customer swipes a credit or debit card, according to court documents filed Friday.

If the proposal is approved by a judge and fully executed, it would represent the largest private antitrust settlement in history. It would also mean that shoppers could start seeing prices for products vary depending on how they choose to pay.


“Reducing these fees will reduce costs, ultimately resulting in lower prices for consumers,” said Patrick J. Coughlin, senior trial counsel at Robbins Geller Rudman & Dowd and one of the merchants’ attorneys.

But one of the largest plaintiffs in the case rejected the terms of the agreement on Friday, casting doubt on whether it would move forward and how effective it would be.

The National Association of Convenience Stores called the monetary settlement a “mirage” and said the agreement does little to change the rules in the battle between retailers and card companies.

Several other retail trade groups involved in the suit, including the National Community Pharmacists Association and the National Grocers Association, said that they are still reviewing the court documents and assessing its impact on members.

The proposed settlement stems from a 2005 lawsuit brought by 20 merchants and trade groups over “swipe fees,” also known as interchange. Swipe-fee rates are set by card processors, like Visa, but are paid by retailers to banks each time a shopper uses plastic. Swipe fees typically run between 2 and 5 percent of the purchase price.

Retailers have long argued that they have little power to negotiate the amount of the fees, calling them “hidden” taxes on consumers that total as much as $50 billion a year. But financial companies say they are charging merchants for providing a key service that many shoppers find indispensable. Last year, the Federal Reserve set caps on the size of swipe fees for debit cards but left credit cards untouched.

Under the terms of the agreement, Visa, MasterCard and the banks would create a $6.05 billion fund to repay retailers for charging high swipe fees.

They would also reduce the fees for eight months to allow new negotiating rules to take effect, an amount expected to total $1.2 billion.

Those new rules include allowing merchants to raise or lower prices on a product to reflect the amount of the swipe fee. Gas stations, for instance, could charge less for using cash. They also require Visa and MasterCard to negotiate in good faith with retailers who band together.

“We believe that today’s settlements should resolve all issues with the merchant community,” Noah Hanft, general counsel for MasterCard, said Friday.

The changes mirror, in part, an agreement reached two years ago between the Justice Department and Visa and MasterCard after an antitrust investigation. The settlement also allowed merchants to discount goods for different forms of payments, although that has not been widely adopted.

The convenience store trade group said the other changes were insignificant: Merchants already have the ability to form buying groups, and the restrictions in the settlement on raising prices to reflect higher swipe fees were onerous.

“We hope and expect that, as they have the time to review it, many other merchants including class representatives will decide to reject this proposal,” said Henry Armour, the group’s president and chief executive.

Although the proposed settlement would cover an estimated 7 million merchants, each retailer must decide whether to participate in the class action. That could reduce the size of the $6.05 billion fund by as much as 25 percent.

The agreement still requires the approval of a U.S. District Court judge. If a significant number of retailers oppose the settlement, the judge may reject it.

“The money is significant, but the test will be whether the injunctive relief that goes along with it is meaningful,” said Mallory Duncan, general counsel for the National Retail Federation, one of the industry’s largest trade groups.

“If it isn’t, then the card market will remain broken, and neither merchants nor their customers will benefit,” Duncan said.

But one of the lead plaintiffs in the suit said he was thrilled with the terms of the agreement.

Mitch Goldstone, who is the president and chief executive of ScanMyPhotos.com, called the deal “a huge win for Main Street versus Wall Street.”

“This is my Erin Brockovich moment after seven years,” he said.



Visa, MasterCard and banks to pay up to $7.25 billion in card-swiping settlement - The Washington Post


According to what I have read they will now charge you to swipe or pay with credit card, when that happens I won't buy from the store and walk out they will loose a sale and the credit card company will loose my business as well. It is a loose loose situation for them, and win for me no more impulse buying

The Interchange Fee Battle is Over


After seven years of deliberation as part of the well-established judicial process, a landmark decision has been announced that a settlement was reached in the long political war over interchange fees. The battle between retailers, payment networks and nine major card issuers over interchange fees and rules is finally over.

As part of the settlement, retailers negotiated the ability to charge their customers a checkout fee (merchant surcharge) at the register. Historically, banning surcharging has been an important safeguard, and it remains illegal in ten states. To the extent that retailers do assess checkout fees, we are pleased that the settlement includes important safeguards that will help to curb any abusive or excess checkout fees at the register.

The deliberate approach of the settlement is in stark contrast to that of the Durbin amendment where, as you know, Congress intervened, picked the retailers as winners, and imposed price controls with no review of the consequences. The Durbin amendment resulted in an $8 billion shift from banks to the retailers, with no benefit to you, the consumer.



To find out how the settlement impacts you and your family, click here.
What The Settlement Means for Consumers | Electronic Payments Coalition

Checkout Fees: What Consumers Should Know

Merchants demanded and have secured the ability to pass their payment acceptance costs on to consumers. Retailers can now impose “checkout fees” on their customers—charging customers an additional fee for the use of credit card—as a term in the settlement.

The settlement does include some safeguards that could help to curb any abusive or excessive surcharges. Also, in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas, surcharging will continue to be illegal due to state law. Residents of these states should report any evidence of retailer checkout fees to their state attorneys general.
See how merchants now have all the POWER »



Consumers should be aware that in some countries where surcharging has been allowed, merchants have used checkout fees as a profit source. Shoppers should be aware of their rights:

Merchants are only allowed to assess a fee that is equivalent to what they pay to accept credit cards – which in the U.S. is typically between 1.5%-3%.
Consumers can only be charged checkout fees for credit card usage. Merchants cannot charge customers for the use of their debit card.

In some countries, such as Australia, where retailers surcharge credit card users, merchants have illegally turned these fees into a profit source. The Royal Bank of Australia was recently forced to cap the amount that retailers could charge in order to prevent customers from being taken advantage of. Shoppers should understand that this settlement has attempted to prevent retailers from charging exorbitant fees and that any fees in excess of the prescribed amount are illegal.
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The epic interchange fee battle is now over. Retailers can now impose “checkout fees” to YOU for using a credit card. Find out how this will impact you


What The Settlement Means for Consumers | Electronic Payments Coalition.

Retailers choose to accept electronic payments because it provides them with significant value – increased revenues, access to e-commerce, reduced expenses associated with cash handling or bounced checks, and guaranteed payment.

Consumers should be very clear – they didn’t see savings from the Durbin amendment, and they won’t see savings from this settlement either. Retailers promised to lower prices if Congress lowered what they pay to accept debit. Instead, they kept an $8 billion windfall, and their customers have not seen any savings.
Quotes from Media Coverage

Wall Street Journal: “Visa Inc. and MasterCard Inc. agreed to pay scores of retailers more than $6 billion to settle a long-running lawsuit in an agreement that also permits merchants to charge higher prices to customers who pay for purchases with credit cards.”
New York Times: ”Retailers have battled to be able to charge more to customers who pay with credit or debit cards, a practice that Visa and MasterCard have banned until now.”
Forbes: “Call them “swipe fees,” “checkout fees,” or “surcharges,” consumers may have to deal with a new expense at the register if they pay with a credit card.”
Wall Street Journal: “Don’t be shocked if your favorite retailer, doctor or restaurant soon asks you to pay an extra 2.5% or 3%, just for using a credit card.”
ABC News: “Payment networks Visa and MasterCard, as well as a number of large retailers, have agreed to a $7.25 billion settlement that may allow merchants to impose a “checkout fee” on consumers for credit card transactions and end a seven-year battle over credit card swipe fees.”
NBC Nightly News with Brian Williams: “Somewhat unbelievably, stores will now be allowed to impose a surcharge for using credit instead of cash.”


What The Settlement Means for Consumers | Electronic Payments Coalition


Merchants have all the power see here:

http://www.electronicpaymentscoaliti...nt-Powers1.pdf



Dodd and Franks bill is coming home to roost, lets shout a big thank you ...oh wait we were warned before told our congresspeople and senators...but we still got it, who do they work for again?????