The seven-year lawsuit against Visa and MasterCard's swipe fees is nearing an end. Since December 2011, U.S. District Judge John Gleeson has supervised at least three settlement conferences in hopes of reaching an agreement and avoiding trial in September.
Although Visa and MasterCard cut the interchange fees on debit cards in half last year, merchants are unhappy with paying nearly 2% per transaction in swipe fees on credit card purchases. The swipe fees, which generate more than $40 billion a year in the U.S., go to credit card issuing banks as revenue.
On Friday, Visa and MasterCard finally reached settlement terms that most plaintiffs' attorneys find agreeable.
- $6.05 billion distributed among merchants involved in the class action lawsuit
- $1.2 billion toward a temporary reduction of swipe fees
- $525 million distributed among merchants who sued individually
- Merchants have the right to negotiate interchange rates with credit card networks
- Merchants have the right to surcharge customers who pay with credit cards, with the exception of the 10 states that have made it illegal to surcharge customers
According to Trefis, "Merchants have been pushing for the right to charge a surcharge fee on credit card transactions, which would help them offset the transaction fees charged by credit card companies. MasterCard and Visa are expected to follow the example set by industry peers Discover Financial and American Express who allow retail merchants to surcharge customers as long as they also surcharge transactions made on other payment networks." Trefis is a community of MIT engineers and Wall Street analysts who help people understand the impact of a company's products on its stock price.
A judge, however, has not yet approved these terms. The credit card companies have filed the settlement paperwork despite at least one division of the lawsuit rejecting the proposal. Those who disagree with the proposed settlement will continue to find a resolution they find more satisfactory.
Read more about the settlement agreement at CardNotPresent.com.