Credit card companies in £4bn settlement over fees 

 

Visa, MasterCard and major banks agreed to pay retailers at least $6bn (£3.8bn) to settle a long-running lawsuit that alleged the card issuers conspired to fix the fees that stores pay to accept credit cards. As part of the settlement, stores from Rite Aid to Kroger will be allowed to charge customers more if they pay using a credit card. 

The pact, announced last night, was called by lawyers involved in the case the largest anti-trust settlement in US history. It was seen as a major victory for merchants that have long complained about the billions of dollars in so-called "swipe" or "interchange" fees that they pay to banks for purchases made using plastic. But at a time when shoppers increasingly are using credit and debit cards, merchants will face a dilemma: Whether to charge shoppers extra for using plastic, and if so, how to do so without angering them. 

Marilyn Landis, who was last year's chairman of the National Small Business Association, said that the settlement is a victory for small businesses across the country because it could ultimately lead to banks lowering the fees they charge stores for customers' credit card purchases. 

Landis, who owns Pittsburgh-based financial services firm Basic Business Concepts, said that would be a big relief. She's now paying 3.75 per cent each time a customer pays with a credit card. If bank card companies reduce the fees they charge her to 2.75 per cent, she would save a dollar on every $100 in sales. 

"That's huge," she said. 

According to the National Retail Federation, the nation's largest retail group, swipe fees costs for stores total about $30bn (£19bn) per year. Mallory Duncan, senior vice president and general counsel for the group, said the settlement is a step in the right direction. 

"What we need are changes in the rules that bring about transparency and competition that would be here for years to come," he said. 

The dispute between stores and banks dates back to 2005. That's when large retailers, including Kroger Co., Safeway Inc. and Walgreen Co. began filing price-fixing lawsuits against Visa, MasterCard and other banks. 

The retailers claimed the credit card issuers worked together to fix the fees that stores pay to accept credit and debit cards. The fees, which vary depending on the type of store and the type of card issues, average about 2 per cent of the price of a purchase. 

Visa and MasterCard make money on the fees that stores pay for each customer that uses credit or debit cards for their purchases. The fees are set by card processing networks but collected by, and split with, the banks that issue the cards. 

The card companies long have defended the fees they charge stores. They say stores benefit from being able to accept credit and debit cards from customers, who often spend more when they're using plastic instead of cash or checks. 

Retailers fought to charge customers who use plastic for their purchases extra. They've argued that the ability to charge customers who use plastic more for their purchases would reduce their costs for accepting the cards. 

But up until now, Visa and MasterCard have banned stores from charging customers who use credit cards more. Merchants, however, have been allowed to offer customers discounts if they pay with cash. Some gas stations do this, for example. 

Visa and MasterCard stock both jumped in after-hours trading. Visa climbed 2.8 per cent, and MasterCard rose 3.7 per cent. 

AP

Suggested Topics
News
people
Sport
FootballGerman sparks three goals in four minutes at favourite No 10 role
News
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Sport
A long jumper competes in the 80-to-84-year-old age division at the 2007 World Masters Championships
athletics
PROMOTED VIDEO
Sport
Radamel Falcao was forced to withdraw from the World Cup after undergoing surgery
premier leagueExclusive: Reds have agreement with Monaco
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Life and Style
Walking tall: unlike some, Donatella Versace showed a strong and vibrant collection
fashionAlexander Fury on the staid Italian clothing industry
Arts and Entertainment
Gregory Porter learnt about his father’s voice at his funeral
music
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
Life and Style
Children at the Leytonstone branch of the Homeless Children's Aid and Adoption Society tuck into their harvest festival gifts, in October 1936
food + drinkThe harvest festival is back, but forget cans of tuna and packets of instant mash
Sport
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
New Articles
i100
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam