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Judge Approves Credit Card Swipe Fees Settlement: Slap On Wrist of Visa, MC?

December 14th, 2013 · No Comments · Credit Cards

Meredith Simonds

by Meredith Simonds

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merchant swiping credit card

Though the settlement awards merchants $5.7 billion, they say it’s not enough to cover the cost of credit card swipe fees they weren’t allowed to pass on to consumers.

Eight years after the lawsuit was brought by merchants against Visa and Mastercard over credit card swipe fees, a U.S. federal judge approved a $5.7 billion settlement last week. Though Reuters reports this is believed to be the largest such settlement in a U.S. antitrust class action lawsuit, merchants say it’s still not enough.

Visa and Mastercard charge retailers a swipe fee every time consumers pay by credit card. While this may be understandable considering that the credit card companies assume risk in credit transactions, what’s far less understandable is why retailers have been prevented from passing these fees onto consumers. It just goes to show how powerful Visa and Mastercard are, as the last thing they want are fees deterring consumers from using credit at checkout.

In fact, the only means merchants have had of covering the cost of credit card swipe fees is to jack up the cost of their products (which they do, passing the cost onto consumers whether we use credit or not).

The newly-approved settlement addresses these objections, but does it go far enough?

Yes, merchants involved in the case will receive a total of $5.7 billion. But this evidently doesn’t cover the losses they have incurred from credit card swipe fees over the years.

Yes, merchants are now allowed to assess a surcharge on consumers who pay by credit, but the circumstances under which they are allowed to do so are reportedly limited, especially since some states have approved, or are considering, bans on such surcharges passed on to consumers. And even in states where surcharges are allowed, their voluntary nature means merchants may think twice about charging consumers a swipe fee, for fear of losing business to competitors who don’t.

It’s also important to note that the settlement prevents merchants involved in the case from pursuing further legal action for the same or similar issues in the future. For this reason, 8,000 merchants pulled out of the settlement, including Walmart, Target, and other major retailers.

Of course, much of this may be neither here nor there, as general counsel for the National Retail Federation says they’re planning to file an appeal.

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