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.
Harry Potter actor suffered 'severe flu-like symptoms' on a flight from London to Orlando
First full-length look is finally here
Rap music mogul accused of running two men over in his truck
World cities ranked in terms of safety, food security and 'liveability'
"Oink! Oink! Hee hee hee!" First interview with the big-screen star
Biohacking group hopes technology will lead people to think about even more dystopian uses
- 2 The awkward moment Sarah Palin raised $25,000 for Hillary Clinton's election campaign
- 3 Ball pool for adults opens in London
- 4 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
- 5 Baldness could soon be treated using stem cells, scientists hope
Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
Mia Khalifa: Pornhub star claims Drake sent her 'cringeworthy' naked photos on Instagram
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
The awkward moment Sarah Palin raised $25,000 for Hillary Clinton's election campaign
Ball pool for adults opens in London
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...