Credit card firms are stumping up in new legal settlement (Photo: Reuters)
Credit card giants Visa and MasterCard agreed Friday to pay more than $6 billion to millions of merchants which had sued them for allegedly fixing card-use fees.
In a negotiated settlement to resolve the seven-year-old case, Visa agreed to pay $4.03 billion to settle the class-action lawsuit while MasterCard and banks that issue cards and were also part of the suit will pay $2.02 billion, according to documents filed in federal court in New York.
The two will also have to cut their so-called "swipe" fees for eight months that could give the merchants another $1.2 billion in relief.
And they will have to allow merchants to impose a surcharge on credit card transactions, subject to a cap.
Law firm Robins, Kaplan, Miller & Cires, which represented about seven million merchants in the suit, said that penalties for the two and other card-issuing banks added up to $7.25 billion -- $6.05 billion for past damages and the $1.2 billion for relief.
Also involved in the settlement are card-issuing banks including JPMorgan Chase, Bank of America, Citibank, Wells Fargo, Capital One and others.
Visa said its total payouts would be $4.4 billion, which appeared to include settlements from separate individual suits over the same issue that were not part of the class-action suit.
"The reforms achieved by this case and in this settlement will help shift the competitive balance from one formerly dominated by the banks which controlled the card networks to the side of merchants and consumers," said Craig Wildfang, lead Robins, Kaplan lawyer in the case for the merchants.
"Over time, the reforms induced by this case and in this settlement should help reduce card-acceptance costs to merchants, which in turn, will result in lower prices for all consumers."
But in a reaction, American Bankers Association president Frank Keating blasted the idea that consumers will benefit from the deal.
"Let's be clear -- retailers, not consumers, benefit from today's resolution," he said.
"This settlement even provides merchants with the ability to impose 'checkout fees' on customers just for using credit cards."
"Only time will tell if this history will repeat itself, as retailers continue to show little regard for consumers."
"While the banking industry may not like all the results in this case, our industry is ready to put this matter behind us."