Technology/Services

Visa, Mastercard Agree to $30 Billion Settlement Over Credit and Debit Card Swipe Fees

Convenience-store, other retail groups say deal is bad for merchants
convenience store visa mastercard swipe fees
Photograph: Shutterstock

Visa and Mastercard have reached a nearly $30 billion settlement to limit credit and debit card fees for merchants by reducing their U.S. credit card interchange rates or swipe fees for at least a five-year period.

The settlement, which also features a set of adjustments to Visa and Mastercard’s network rules, giving merchants more choice in how they accept digital payments, according to the credit card companies.

The agreement includes:

  • Interchange rate reduction. Payment networks, including Visa and Mastercard, will reduce the published and effective interchange rate on U.S.-issued consumer credit and commercial credit transactions at U.S. merchant locations.
  • Interchange rates will not go up. The agreement will cap the reduced credit interchange rates for five years, providing a level of cost certainty long sought by merchants.
  • New ways to manage costs. The settlement gives merchants greater flexibility at the point of sale, including the opportunity to steer to preferred payment methods and more optionality around surcharging. It also provides funding for new programs to educate small businesses about payment acceptance options and how to best manage costs.

“This agreement brings closure to a longstanding dispute by delivering substantial certainty and value to business owners, including flexibility in how they manage acceptance of card programs,” said Rob Beard, chief legal officer, general counsel and head of global policy at Mastercard, San Francisco.

“By negotiating directly with merchants, we have reached a settlement with meaningful concessions that address true pain points small businesses have identified,” said Kim Lawrence, president for North America at Visa, Purchase, New York.

The settlement agreement with merchants resolves claims against Visa, Mastercard and other defendants brought by the injunctive relief class in the lawsuit entitled In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation.

The settlement—estimated at $29.79 billion in savings that will be realized in the five years following approval of the settlement from agreed upon caps and rollbacks on credit card processing fees or swipe fees—is among the largest in U.S. antitrust history, is subject to approval by the U.S. District Court for the Eastern District of New York. The class includes all merchants who accepted Visa or Mastercard debit or credit cards in the United States at any time during the period between Dec. 18, 2020, and the date of entry of final judgment by the court. The class is represented by Steve Shadowen of Hilliard Shadowen LLP; Robert Eisler of Grant & Eisenhofer PA; Michael Freed of Freed Kanner London & Millen LLC; and Linda Nussbaum of Nussbaum Law Group.

Upon final approval of the class settlement by the court, Visa and Mastercard will have resolved the vast majority of all pending U.S. merchant litigations that are directed at seeking changes to the companies’ interchange structure and merchant acceptance rules.

In agreeing to the settlement, Visa and Mastercard do not admit to any improper conduct with respect to the plaintiffs’ allegations. All rules practice changes will occur after approval of the settlement, most likely in late 2024 or early 2025, the companies said.

The settlement “would provide very small relief and does not end the need for Congress to pass legislation,” the Merchants Payments Coalition (MPC) said in a statement following the announced agreement.

“This settlement is a bad deal for merchants,” MPC Executive Committee member and National Grocers Association Senior Vice President of Government Relations and Counsel Christopher Jones said. “A few years of very small relief followed by business as usual is not a good outcome from 20 years of litigation. The settlement does nothing to actually bring competitive market forces to swipe fees or change the behavior of a cartel that centrally fixes rates and bars competition. Instead, it tries to provide token, temporary relief and then allows the card companies to raise rates yet again. Congress needs to act so that we will have real reform that will benefit merchants and their customers.”

The National Association of Convenience stores (NACS) also said, “The announced settlement does not address the lack of competition in the marketplace and is not related to the Credit Card Competition Act. Bills introduced in both the U.S. House and Senate would require the largest U.S. banks that issue Visa or Mastercard credit cards to allow transactions to be processed over at least two unaffiliated card payment networks—the same process that has been used for debit card transactions for more than a decade.

“Most significantly, the settlement is drafted as ‘mandatory,’ which means that it would bind all other litigants—including the separate suit that NACS and some of its members are pursuing. Those cases could still push for monetary claims, but the settlement (if approved) would cut off any injunctive relief and rules claims.”

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