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Credit card interchange fees have been a huge burden for many merchants. These fees, charged by major credit card companies like Visa and Mastercard, significantly impact businesses’ financial health, given their complex and sometimes excessive nature.
Recent legal action has compelled Visa and Mastercard to settle a lawsuit accusing them of overcharging merchants via interchange fees. Under the settlement, businesses can claim fees from Jan 1, 2004, to Jan 25, 2019. The agreement will cut and cap fees imposed by Visa and Mastercard and empower small businesses to negotiate rates collectively with payment processors, akin to larger merchants.
However, recent rulings have changed the landscape of finding a final resolution. As of June 25th, Brooklyn US District Judge Margo Brodie rejected a $30 billion antitrust settlement in its current state.[1]Reuters. “Visa, Mastercard can likely handle settlement much bigger than $30 billion, judge says.” Accessed July 02, 2024. Finding Visa and Mastercard’s offer to be inadequate, Judge Brodie revealed, “Without evidence of Visa’s and Mastercard’s profitability, the court cannot say with certainty that defendants can withstand a greater judgment; however, the evidence strongly suggests that they could withstand a substantially greater judgment.” Although the current proposal would lead to an estimated $6 billion in annual savings for merchants, Judge Brodie believes this amount is nothing compared to the $100 billion in fees they paid to accept Visa and Mastercard in 2023. Contributing to Judge Brodie’s reasoning, numerous merchants and trade groups, such as the National Retail Federation, argued that the current proposal failed to appropriately decrease fees or minimize Visa and Mastercard’s control over card transactions. Still, spokespeople for Visa and Mastercard have expressed their disappointment at the ruling, believing that their concessions would give merchants increased flexibility and options.
Now, Visa and Mastercard must negotiate a new merchant-friendly settlement offer or risk going to trial. Despite these unknown variables, the judge’s decision thankfully does not pause an earlier $5.6 billion class action swipe fee settlement between the two card companies and around 12 million merchants.[2]Reuters. “Visa, Mastercard $30 billion swipe fee settlement rejected by US judge.” Accessed July 02, 2024. Although the entirety of this case remains in limbo, the upheld class action settlement can provide some relief to many businesses. To see how this legislation can affect you, we’ll dive into the full history of the settlement and explore claiming your share.
Visa and Mastercard Interchange Settlement Summary
The lawsuit has been in the work for over a decade. It originated from allegations that Visa, Mastercard, and their member banks were engaging in anti-competitive practices by imposing excessive fees on merchants for credit and debit card transactions.
Robins Kaplan, acting as co-lead counsel, initiated the litigation over 18 years ago, representing a class of over 10 million U.S. merchants who accept Visa and Mastercard cards. They pursued an innovative legal theory arguing that the interchange fee structure and rules imposed by Visa and Mastercard were anti-competitive. This initial legal action laid the groundwork for the consolidated case, eventually leading to the settlement.
In 2012, the parties reached an initial settlement, later reversed on appeal. However, they reached a new negotiated settlement in 2018, totaling around $5.5 billion, which received final approval in December 2019. Notably, the Second Circuit Court of Appeals heard an appeal regarding the settlement in March 2022, ultimately upholding the district court’s decision in March 2023.
Jeff Brabant, vice president of federal government relations at the National Federation of Independent Business, has voiced his hesitancy at the settlement, stating, “While this settlement is a step in the right direction and will provide a limited amount of short-term relief to small businesses, it does not solve the long-term anti-competitive rate-setting practices that are the root of this problem.”
This is primarily in response to the fact that while fees will be lowered, they will only be for a limited time—three to five years—after which they will return to their current levels.
Who Does The Visa and Mastercard Interchange Settlement Affect?
At PaymentCloud, we are about one thing—helping small businesses maximize savings on processing fees, especially in light of the recent Visa and Mastercard interchange settlement. This landmark legal settlement allows eligible businesses to claim their share of fees incurred between January 1st, 2004, and January 25th, 2019.
It’s important to note that even if your business is no longer functional, you may still be eligible for compensation if you were active during the abovementioned period.
PaymentCloud’s expertise lies in navigating the intricacies of payment processing, particularly for high-risk businesses. By leveraging our industry knowledge and relationships with major card networks, PaymentCloud assists small businesses in accessing the compensation they deserve under the settlement. Whether deciphering complex legal jargon or ensuring compliance with documentation requirements, PaymentCloud guides businesses every step of the way.
What’s The Visa and Mastercard Interchange Settlement?
When minimizing the financial burden associated with processing fees, PaymentCloud enables businesses to redirect resources toward growth and innovation by deciphering complex legal jargon or ensuring compliance with documentation requirements. PaymentCloud guides businesses every step of the way.
In the hopes of a fair settlement distribution, a $5.54 billion fund will be distributed among claimants pro-rata, depending on the number of claims filed. This means that each claimant will receive a portion of the settlement fund corresponding to their percentage of the total valid claims filed.
How Can You Claim Your Share?
PaymentCloud’s comprehensive approach extends beyond the settlement period. We proactively assist businesses in negotiating favorable rates with payment processors, mirroring the practices of larger merchants. This collective bargaining power strengthens small businesses’ position in the market, ensuring fair and transparent pricing structures.
File a valid claim before the August 30, 2024 deadline. On the website, you will need either your Claimant ID and Control Number, located in the middle of the Claim Form, or a Taxpayer Identification Number (TIN) along with some additional information. A class Administrator will attempt to determine whether you are a merchant eligible to file a claim in this Settlement.
PaymentCloud merchant services are a powerful resource for small businesses navigating the harsh complexities of payment processing. We help business owners capitalize on opportunities for cost savings, including those presented by the Visa and Mastercard interchange settlement.
Claim forms can also be mailed to:
Payment Card Interchange Fee Settlement
P.O. Box 2530
Portland, OR 97208-2530
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Editor’s Note: This post was originally published in April 2024 but has been updated for continued accuracy and comprehensiveness.
