A settlement has been reached by Mastercard Inc, Visa Inc and banks that are issuers of their credit cards for $7.25 billion with retailers in the U.S. over a lawsuit that fixed debit and credit card fees. The agreement could be the largest in U.S. history for an antitrust settlement.
If the judge approves the settlement it would resolve dozens of pending lawsuits that retailers filed back in 2005. The banks and card companies would also allow retailers to start charging extra to customers for using certain types of credit cards in an attempt to direct them towards payment forms that were cheaper.
Papers for the settlement were filed Friday in federal court in Brooklyn. Swipe fees, which are charges that cover the processing of debit and credit payments, are set up by the credit and debit card companies and taken out of the total of the transaction by those banks that are issuers of the cards. That is essentially passing the cost on to the merchant, said the lawsuits.
The settlement proposal involves making a payment to stores of $6 billion from Mastercard, Visa and over a dozen of the largest banks in the U.S. who issue cards for the companies. The card companies also have agreed to lower the swipe fees by 10 basis points for an eight month period for a consideration to the stores that is valued at approximately $1.2 billion.
Merchants, if the deal is approved, will be allowed to collectively negotiate the swipe fees. In addition, merchants would be required to disclose to customers information regarding each card and surcharges would contain a cap.