Update on Visa & MasterCard Settlement

June 27, 2013

The settlement that was reached last fall in the class-action lawsuit between Visa and MasterCard and a large group a retailers is still being argued over. The latest update comes with concerns from some of the class members such as Wal-Mart, Target, and national associations representing grocers, smaller retailers, etc.

At its core, a settlement is just that: settling.  The two parties agree to terms that include both sides giving up something in an attempt to mitigate the concerns of the plaintiffs but not at the full value of the original case. The defendants must also address the initial concerns of the case but are then granted protection from future legal action and costs for addressing those concerns.

The fear that the class member have is that the “Release” that the defendants sign will be too broad and protect Visa and MasterCard from legal actions in the future. This protection leads the associations, states and others to believe that the banks and card brands might be abusive in the future. If there are future abusive practices, these members believe that they will be powerless to seek any relief in the court system.

Part of what the settlement established was the right for merchants to offset their processing fees by directly surcharging customers that use credit cards. On the surface this looks like a good concession by the card brands in favor of the merchants. But considering that some large merchants, such as Wal-Mart, have publicly stated they will not be surcharging customers it is almost a tool in the belt that can’t be used.

On the flip side, if businesses choose to surcharge on credit card transactions it puts the customer in a direct decision making situation. Customers could very easily make a shift back to using cash instead of cards, which equals a loss for payment processors.

As far as the appeal by the plaintiffs in this case it looks unlikely that Judge Gleeson (the judge for the case last year) reconsider the appeal as he has already heard the concerns and rejected the legitimacy of them. Furthermore, a separate appeals court heard the same argument and also dismissed them. Thus, as it stands currently, it appears that the settlement will move forward barring any unforeseen complications.

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