Visa, MasterCard Update on Lawsuit

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Visa and MasterCard lawsuit

Source: Getty Images, JB Reed

Earlier this week, both Target and Wal Mart, not happy with the way a class action lawsuit played out, led the charge for merchants and retailers to reject it. The lawsuit ordered banks, Visa, MasterCard and other credit card companies to pay more than $6 billion for fixing merchant fees associated with every credit card and debit card transaction.

Part of the settlement allows retailers to pass interchange fees to consumers – though the companies agreed to a temporarily reduction in those interchange fees. Sometimes referred to as swipe fees, they average around 2% of a consumer’s total receipt and have been problematic for retailers across the country. Until now, the two biggest credit card companies, Visa and Mastercard, prohibited any type of reduction.

And now, it appears Wal Mart’s efforts have paid off. President and CEO Peter Larkin of the National Grocers Association announced the group

joined the lawsuit on behalf of its independent retail grocer members over seven years ago to bring about real reform of the anti competitive credit-card swipe fee system. This proposed settlement agreement fails in this regard by allowing Visa and MasterCard to continue their dominant anti competitive practices.

And now the line in the sand’s been drawn.

Meanwhile, Wal Mart released its own statement on the settlement:

As Walmart continues to seek reform that will provide transparency and true competition among financial institutions, we encourage all merchants to put consumers first and reject the settlement.

Almost simultaneously, Target released its presser that reiterated Wal Mart’s commitment.Target continues to insist the entire credit card industry is broken and that it was naive if anyone believed the parameters of the settlement would serve any purpose or solve any problem.

The trade group represents more than 1,000 companies and says there are too many shortfalls that are part of the settlement and until those shortfalls are addressed, the settlement is moot. Specifically, it says the credit card companies still have defined no parameters that will ensure fair interchange fees are calculated. If nothing else changes, the provision will also require merchants to post signs notifying their customers that they surcharge as well as some type of fee schedule – either a dollar amount or percentage.

The proposed settlement hasn’t made it through the legal channels yet, but if and when it’s passed, it will cost those banks and card carriers $6 billion. The suit has dragged on for more than five years and included fifty plaintiffs at one point.

It would appear MasterCard is being slightly more aggressive. It’s now reminding – and possibly attempting to intimidate – retailers of how much time and money they’ve already spent and that it’s not likely any future efforts would result in any different outcome.

Visa continues to refer all media requests to the Electronic Payments Coalition, a group that represents credit card companies, banks and credit unions. Visa also insists Wal Mart is forgetting the burden on its customers because it’s self serving purposes are rarely in line with the needs of its customers. Referring to Wal Mart’s position as “at absolute odds with the class representative plaintiffs”, it insists the retail giant is overlooking the intimate involvement of millions of plaintiffs who were involved in “extensive negotiations”. Its statement then concluded that Wal Mart’s individual “self interest” isn’t always in line with the interests of its customers and competition. It too says that the lawsuit has dragged on for six years.

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About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


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CREDIT DAD is an independent, advertising-supported website. Many debit cards, credit cards and other financial offers that appear here are from companies from which CREDIT DAD Websites receive compensation. This compensation may impact how and where products appear on this website (including, for example, the order in which they appear). CREDIT DAD Websites do not include all card offers in the marketplace.