Legal Advice for Businesses Affected by the Interchange Fee Settlement

Visa and MasterCard have reached a landmark agreement to limit credit card swipe fees, marking one of the most substantial antitrust settlements to date. Following nearly two decades of legal battles, this resolution is expected to save US merchants a minimum of $30 billion over the next five years. Pending court approval, the agreement allows retailers to levy additional charges on consumers using Visa or Mastercard credit cards at checkout. It permits merchants to employ pricing strategies to guide customers toward lower-cost cards. This article discusses legal advice for interchange fee settlement for the affected businesses.

The recent Payment Card Interchange Fee Litigation judgment, a class action lawsuit against Visa and Mastercard, heralds a significant turning point for American merchants. This long-awaited settlement mandates notable alterations in interchange fees, promising widespread implications for businesses nationwide.

Understanding the Settlement

The lawsuit accused Visa and Mastercard of violating antitrust laws by collaboratively setting high interchange fees. The settlement, approved by the Eastern District Court of New York, represents a collective effort to address these allegations and rectify the excessive fee structure imposed on merchants​.

Now Visa and Mastercard have reached a significant settlement with U.S. merchants, potentially concluding nearly two decades of litigation concerning the fees incurred with each use of credit or debit cards in businesses. This agreement proposes to reduce and limit the fees Visa and Mastercard charge, and it would also enable small businesses to negotiate rates collectively with payment processors, a privilege currently enjoyed by larger merchants alone.

Retail industry groups representing small and large businesses have welcomed the settlement as a positive step. However, they emphasize that more actions are necessary to address the ongoing issues with swipe fees. They pointed out that the fee reductions would only last for a limited period—three to five years—after which the fees would revert to their former rates.

The litigation over credit card interchange fees is now moving to the settlement administration phase, marking anticipation of payments after an over 18-year-long involvement since 2005.

The settlement amount has been set at $5.5 billion, and eligible merchants can SUBMIT A CLAIM by August 30, 2024.

Businesses that accepted Visa and/or Mastercard transactions from 2004 to 2019 are eligible to file a claim for a portion of the $5.54 billion settlement.

Key Features of the Settlement

• Interchange Fee Reduction: Visa and Mastercard have agreed to reduce the published interchange fees on domestic credit transactions at U.S. merchant locations. A decrease of 4 basis points across all transactions, with an additional reduction of 3 basis points for certain fee programs. This reduction will be maintained for a period of five years, ensuring cost savings for businesses​.
• Moratorium on Fee Increases: Alongside the reductions, the settlement imposes a five-year moratorium on any increases in credit interchange fees, beginning in April 2025. A limit set at a minimum of 7 basis points beneath the current average rate. This provides businesses with predictable costs and financial stability for the foreseeable future​​.
• Simplified Surcharging Rules: The agreement simplifies the rules around surcharging credit card transactions, giving merchants more flexibility and transparency in their pricing strategies​.

Legal Advice for Interchange Fee Settlement for Businesses

The settlement represents a significant development in U.S. legal and business sectors. It is noted as one of the largest antitrust settlements in the nation. This settlement modifies operational rules around surcharges and card acceptance, allowing merchants to apply surcharges on Visa and Mastercard transactions at the brand or product level. Such adjustments are likely to influence merchant strategies in pricing and cost management. Furthermore, the settlement facilitates the creation of merchant coalitions that can negotiate more favorable terms with the card issuers, potentially reducing transaction costs further.

While the settlement retains some existing surcharging rules, it also introduces revisions to make merchant conditions less laborious. These changes include allowing the continuation of surcharges, contingent upon compliance with certain notice and disclosure requirements. Critically, the agreement prevents Visa and Mastercard from setting up interchange rate structures that would unfairly penalize merchants who choose to implement surcharges.

A significant compensation fund has also been set up as part of the settlement. This fund allows for partial reimbursement to merchants who incurred interchange fees during the specified period covered by the lawsuit. This provision underscores businesses’ need to be fully aware of how these changes impact their operations, costs, and legal rights. Participating in this settlement could result in substantial financial benefits and reduced costs in card payment acceptance.

Companies impacted by the Payment Card Interchange Fee Settlement should know their options and act accordingly to address the legal repercussions efficiently.

Essential Actions for Companies:

• Verify Eligibility: Companies must first confirm whether they are included in the settlement class. This excludes certain plaintiffs, entities like government bodies, and the defendants’ affiliates. Those eligible are businesses that accept Visa or Mastercard branded cards during the defined time frame.
• Comprehend the Settlement: The settlement outlines specific protocols for handling Visa and Mastercard transactions. It includes provisions for forming merchant groups for better negotiation leverage and maintaining certain surcharge rules. Visa and Mastercard will adjust their policies to give merchants more flexibility in accepting digital wallets, with specific surcharging rules and the types of acceptable digital wallets.
• File a Claim: Eligible companies must file a claim to participate in the settlement. They can acquire the claim form from the settlement’s official website or receive it through mail from the settlement administrator. The form requires details on transactions and fees paid. Claims can be based on estimated totals provided by Visa and MasterCard or detailed transaction data for a tailored claim evaluation.
• Claim Before Deadline: Submitting claims by August 30, 2024 is critical. Missing this deadline will lead to a loss of potential settlement funds.
• Legal and Financial Advice: Companies should seek advice from legal and financial experts to ensure their claim is correctly filed and to understand the settlement’s wider effects, such as potential impacts on payment processing strategies and necessary financial adjustments.
• Additional Support: Assistance is available from the Claims Administrator or class counsel, who offers guidance on claim filing and understanding at no extra charge. Companies are advised to utilize the official settlement website to steer clear of scams and guarantee secure communications and submissions.

Can I use a third-party service to submit the claim?

Yes, merchants have the option to employ third-party services to submit claims for the Visa/Mastercard Settlement. However, they can also choose to file claims on their own to avoid third-party fees. Remember, the deadline to Submit a claim is August 30, 2024.

Host Merchant Services has partnered with Certificate Clearing Corporation (CCC) to assist businesses seeking early cash payouts from the $5.54 billion Visa-Mastercard class action settlement. CCC specializes in class action settlements that offer cash or transferable coupon payouts. It actively purchases claims, which can potentially enhance the value of an award or provide immediate financial advantages.

Conclusion

The Payment Card Interchange Fee Settlement marks a significant shift in the landscape of credit card processing fees. By actively engaging with the settlement terms and seeking appropriate legal advice, businesses can mitigate their operational costs and enhance their financial strategies in the future.

This settlement addresses past grievances and paves the way for a more competitive and transparent market in payment processing, benefiting businesses and consumers alike.

Frequently Asked Questions