Visa and Mastercard yesterday announced a settlement in a long-running class action that will see the card processing giants lower the fees they charge merchants for credit cards transactions and cap those fees for five years.
The two companies have bene battling merchants in court for two decades over the interchange fees they assess every time a consumer uses a credit card to make a purchase. The merchants have argued they were paying too much to the two companies.
Under the terms of the settlement, all swipe fees or interchange fees will be lowered by 0.04 percentage points for three years, and the average rate will be lowered by 0.07 percentage points for five years. This will work out to about $30 billion in fees that will be eliminated during the five-year period. Merchants paid $72 billion in interchange fees last year, according to a published report.
The settlement still must be approved by a federal judge and other deals have not been approved or were appealed because of the wide range of merchants involved as plaintiffs in the suit. Among them are Home Depot, Starbucks, and 7-Eleven. The general counsel for the National Association of Convenience Stores said, for example, that he expects “a lot” of merchant opposition to the proposed settlement.
Merchants filed the suit back in 2005 with the intention of being able to negotiate interchange fees directly with banks, instead of being told how much to pay.
“This agreement brings closure to a long-standing dispute by delivering substantial certainty and value to business owners, including flexibility in how they manage acceptance of card programs,” said Rob Beard, the Chief Legal Officer, General Counsel and Head of Global Policy at Mastercard, in a statement. “As the court reviews the settlement, we will focus our energy on continuing to provide consumers, small businesses and all business owners what they expect from Mastercard – a better payments experience, strong value and peace of mind.”
