Judge Rejects Visa/Mastercard Swipe Fee Settlement

Proposed rate reduction deemed inadequate

By Alan Wolf, YSN

A federal judge last week rejected a proposed settlement of a 19-year-old, class-action antitrust lawsuit over excessive swipe fees charged to retailers who process Visa and Mastercard transactions.

U.S. District Judge Margo Brodie had previously cited concerns by merchant groups including the National Retail Federation (NRF) that the preliminary settlement would not provide adequate relief.

Lowball Offer

Under the terms, Visa and Mastercard would have reduced rates for each swipe fee category by 4 basis points for three years and trimmed average rates by 7 basis points for five years. The reduction would have saved merchants an average of $6 billion annually, which NRF described as “a drop in the bucket” compared to the $100 billion in Visa and Mastercard swipe fees collected last year.

In addition, the agreement applied only to “interchange” fees that go to card-issuing banks, while Visa and Mastercard would be free to raise “network” fees they receive, potentially offsetting any savings.

“The proposed reduction in swipe fees was tiny and temporary and ignored the underlying issue of how these fees are centrally set, rather than allowing banks to compete to offer the best rates,” said Stephanie Martz, chief administrative officer and general counsel for NRF. “We’re glad … we can move forward to real relief from these ever-increasing fees that drive up costs for small businesses and prices for American families.”

Related: Small Dealers Slammed by Credit Card Swipe Fees

The decision does not affect a related $5.5 billion class-action settlement that charged the financial giants and some 30 banks with setting excessive interchange fees well above the typical 1-2% of the purchase price. The deadline for dealers to submit a claim for their share of the funds has been extended to Aug. 30, 2024. Merchants who accepted Visa- or Mastercard-branded cards between 2019 and 2004 may apply for restitution here.

See: Get Your Piece of the $5.5B Visa/Mastercard Settlement

AVB addressed the issue separately this past spring by launching an in-house credit card processing program at the 2024 Summit. Dubbed Trusted Transact, the initiative is designed to save BrandSource members hundreds or even thousands of dollars a month in fees by offering pre-negotiated rates and a single merchant service provider for all transaction platforms, including HUB, Alta e-commerce sites and in-store terminals.

See: AVB Brings Credit Card Processing In-House

Upcoming Events