On Tuesday, March 26, 2024, Visa and MasterCard announced a settlement with US merchants related to swipe fees, a development that could save consumers tens of billions of dollars.
Mark Lenihan/AP
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Mark Lenihan/AP
On Tuesday, March 26, 2024, Visa and MasterCard announced a settlement with US merchants related to swipe fees, a development that could save consumers tens of billions of dollars.
Mark Lenihan/AP
NEW YORK — Visa and Mastercard announced a major settlement with U.S. merchants on Tuesday, potentially ending nearly two decades of litigation over fees charged every time a credit or debit card is used in a store or restaurant.
The deal will lower and cap fees charged by Visa and Mastercard, and allow small businesses to collectively bargain prices with payment processors in a similar way that large merchants do on their own now.
Industry groups for both small and large retailers said the settlement is a positive development, but more needs to be done to address the current situation of swipe fees. They noted that the reduced fees would only be for a limited period of time – three to five years – after which fees would return to their current levels.
“While this settlement is a step in the right direction and will provide limited short-term relief for small businesses, it does not resolve the long-term anticompetitive price-fixing practices that are at the root of this problem.” said Jeff Brabant, vice president of federal government relations at the National Federation of Independent Business, a small business advocacy group. “As long as the credit card networks, Visa and MasterCard, can set interchange rates for each bank that issues a credit card, anti-competitive rates will remain in place, and small businesses will continue to pay artificially high rates.”
Swipe fees are paid to Visa, Mastercard, and other credit card companies in exchange for enabling transactions. Merchants ultimately pass these fees on to consumers who use credit or debit cards. the expenses It is charged as a flat fee plus a percentage of total sales, usually around 1% to 3%.
Increasingly, small businesses have begun placing signs near the register warning customers that they will pay more for the same item if they do not use cash.
According to the settlement announced Tuesday, Visa and MasterCard will cap credit interchange fees through 2030, and companies must negotiate fees with merchant purchasing groups.
The law firm that announced the settlement estimated the savings in rollover fees at nearly $30 billion.
The settlement stems from a 2005 lawsuit charging that merchants charged excessive fees to accept Visa and MasterCard credit cards, and that Visa, MasterCard and their member banks acted in violation of antitrust laws.
In 2018 Visa and MasterCard agreed to pay $6.2 billion As part of a long-running lawsuit brought by a group of 19 merchants. But the lawsuit had two pieces that needed to be resolved: the dispute over the rules Visa and Mastercard impose for accepting their cards, and the merchants who chose not to participate in the settlement.
“This settlement is just a drop in the bucket,” said the Retail Industry Leaders Association, a trade group that represents Target, Home Depot and other major chains. “It demonstrates that traders deserve injunctive relief, but whether the terms of the proposed settlement are sufficient to address the harm caused by the current exchange system needs to be carefully reviewed.”
Mary Liz Curtin and her husband own two businesses, Leon & Lulu, a retail store in an old converted skating rink, and Three Cuts Restaurant, a restaurant in an old converted movie theater, in Clawson, Michigan.
Withdrawal fees have become a particular problem since the pandemic, when cash use declined, she said. Most people use cards now, which means the roughly 3% swipe fee you pay eats up a lot more revenue than it did before.
“Like all retailers, our cash sales and check sales are down because people are charging everything,” Curtin said. “That means there's a nice 3% slice of your top gross sales.”
She welcomed the settlement.
“I am happy with anything that improves the situation,” she said. “I think this will help a little.”
But she says swipe fees remain “useless.”
Once credit card mileage rewards and other perks became the norm, card usage soared, said Mike Roach, who owns Paloma Clothing with his wife in Portland, Oregon. He said swipe fees were a big cost to the business — before the pandemic, he calculated, some years his card fees were greater than his (admittedly low) rent.
He said he believes the settlement “is not going to change anyone's bottom line very much.” “But it's a step in the right direction.”
The settlement is in addition to a $5.54 billion 2023 financial settlement between Visa, Mastercard and 18 million businesses that accepted Visa or Mastercard during the 15-year period through January 25, 2019. Eligible merchants who received a claim form in the mail in December and January A share of that settlement can be claimed Until May 31.
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