Visa and Mastercard reach $30 billion settlement over credit card fee dispute

Merchants have long accused payment networks of charging exorbitant “swipe fees” when shoppers use their cards.

Visa and Mastercard have reached an estimated $30 billion antitrust settlement to limit credit and debit card fees to U.S. merchants, with some of the savings passed on to consumers through lower prices. is likely to be returned to.

If approved by the court, it would resolve most claims in the nationwide lawsuit that began in 2005. But some opponents believe this may not be enough.

For years, merchants have charged high swipe and interchange fees when shoppers use credit and debit cards, and “anti-steering” rules prohibit them from steering customers to cheaper payment methods. Visa and Mastercard have been accused of

According to Bankrate.com, swipe fees typically include a small fixed fee and a percentage of the total sale amount, averaging around 1.5 to 3.5 percent per transaction.

Under the proposed settlement, Visa and Mastercard would reduce their swipe rates by at least 4 basis points (0.04 percentage points) over three years, ensuring an average rate that is 7 basis points lower than the current average for five years.

The card networks also agreed to cap rates for five years and eliminate anti-steering provisions.

Merchants will have more discretion to offer discounts or impose additional fees on cards with higher interchange fees.

Many customers have already warned that they will end up paying more using cards instead of cash at checkout.

The fee rollbacks and caps alone are worth $29.79 billion, according to court documents, and Visa estimates that more than 90% of its payment merchants are small businesses.

In reaching the settlement agreement, Visa and Mastercard denied any wrongdoing.

Kim Lawrence, Visa’s president of North America, said in a separate statement that the agreement addresses “real challenges” identified by small businesses, and Rob Baird, general counsel for Mastercard, said the agreement addresses “real challenges” identified by small businesses. It said it would provide “substantive certainty”.

Shares of Visa and Mastercard each rose less than 1% in afternoon trading, with Baird analyst David Corning writing that the settlement eliminates “a plethora of uncertainty.”

The settlement must be approved by U.S. District Judge Margo Brody in Brooklyn, New York, which is unlikely to be approved before late 2024 or early 2025 and could be subject to appeal.

‘not a big deal’

The Retail Industry Leaders Association, which represents companies that employ more than 42 million Americans, said the settlement warrants careful consideration but is “just a drop in the bucket.”

TD Cowen analyst Jarrett Seiberg said small banks and credit unions object because large retailers such as Walmart could end contracts with big banks for cards that offer discounts at checkout. It says that it is possible.

But he said the deal reflects “special concessions” by Visa, Mastercard and banks, as merchants can impose additional fees on airlines and cash-back credit cards. However, few merchants may do so because they would rather complete the sale than save on fees.

Last March, a federal appeals court in Manhattan upheld a $5.6 billion class action settlement by Visa and Mastercard that compensated about 12 million merchants for their losses, but left open questions about what types of fees would be imposed. was not resolved.

Tuesday’s settlement attempts to do that, but it does not resolve damages claims by merchants who rejected the $5.6 billion settlement and filed separate lawsuits.

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