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Credit Card Surcharges: What’s Next?

Credit Card Surcharges: What’s Next?

It’s growing convoluted, frustrating and still – no definitive answers are being provided concerning the massive multi billion settlement between retailers and some of the nation’s biggest credit card companies. Here’s where things stand today.

The History

This all began in 2005 when merchants came together and filed lawsuits against Visa, MasterCard and their member banks. They said the financial entities violated federal antitrust laws due to their interchange fees. The merchants also said that both MasterCard and Visa were working together to ensure the fees stayed high; since these two card companies cover 80% of credit cards in circulation, they said they were unable to to use those services because of the high fees. They insisted their businesses were suffering as a result. In one suit filing, a merchant said,

The people who used to sit on Visa’s board of directors are now on MasterCard’s and vice versa. Visa and MasterCard’s rates always go up together…it’s a monopoly because costs keep rising and we have no choice but to pay.

By 2009, the new CARD act had been signed into law and politicians went to work on authoring new legislation that would make changes in how the fees were set.

Soon, the responses, counter filings, accusations and counter accusations became the identifiable quality in the suits – everyone was in on the accusations and blame game. Both sides argued that consumers would be the ones to shoulder the burdens. That might have been the truest statement in the entire brouhaha.

The Deal’s Sealed

At any rate, a judge sealed the deal with a $7.2 billion settlement that would affect 8 million merchants. Many of the larger retailers, such as Wal Mart and Home Depot immediately filed objections to the ruling. If merchants opt out, they will then be ineligible to receive a portion of the monetary damages; however, they will still be bound by different aspects of the settlement including the inability to sue Visa and/or MasterCard over similar interchange issues in the future, if the settlement is approved. But there’s another problem, too. There very well could be a new round of criticism of the deal from some of the other larger U.S. retailers, which many feel could lead to even more more opt-outs. The credit card companies believe they have a judge’s backing in the settlement, but a high number of opt-outs could imperil the hard-fought pact.

Now, four months later, a new controversial website has popped up and you can be sure the battle lines have been drawn. The site was brought live in an effort to make it easy for merchants to opt out of the settlement if they don’t believe it was fair. The site, was founded by eight retail trade associations and its motto is “Say no to Visa and MasterCard fixing fees”. Not only does it provide the latest information on the suit, but it provides everything needed to opt out of the settlement. And the site promises that opting out will take only five minutes.

Of course, for those who played a role in negotiating the settlement, they are seeing red and are furious. Among those against the site are Payless footwear and other smaller retailers. Now they’ve taken their complaints to yet another courtroom. In a matter of hours, arguments will be heard by U.S. District Judge John Gleeson. Those opposed to the site want him to order clearer language and elimination of misleading verbiage. The judge wasted no time in stating his authority is absolute and he expects this to be handled quickly. One reason might be because of a deadline that’s quickly approaching for retailers to file any objections to the final settlement.

Remember, the new settlement means different merchants and retailers will receive $6 billion from both Visa and MasterCard, as well as certain issuer banks. The big problem for many, though, is that the card networks will still maintain control over how the swipe fees are determined. It’s a problem, to be sure.

While it’s not certain which retailers are supporting the website, there are many that are opposed to the settlement and include 7-Eleven, Home Depot, Target, Walmart, just to name a few.

And the Problem?

So exactly what is the problem with the website? The court papers were made public on Wednesday and in in them, the retailers say visitors are given the option of opting out of and objecting to the lawsuit, but not doing only one or the other. A merchant who objects to the settlement but does not opt out will still be eligible to receive a cut of the funds, but there’s one page, “Opt Out & Object”, doesn’t provide the information noting the differentiation. There are also complaints about the absence of a mention that another website exists and in fact, was ordered to be brought live by the courts in an earlier decision. Those opposing the site want it to at least make the address visible of the website.

Finally, they say that the website is slanted to encourage support, which, frankly makes sense to anyone – why bother with the site if you’re not attempting to provide a specific side of the case? At any rate, the website’s founder says it is slanted, but not misleading.

For its part, the new website’s lawyers have a few thoughts, as well.

There’s incredible dissatisfaction with the proposed settlement,

says Douglas Kantor, a lawyer who represents the National Association of Convenience Stores, one of the trade associations behind He says that the lawyers for the plaintiffs have ulterior motives and only wish to silence those opposed to the agreement. Most of the legal eagles associated with today’s court hearing have shut down their public comments in anticipation of what’s sure to unfold in a matter of hours. Still, the arguments haven’t changed – merchants believe they’re being forced to lose money because of the ever changing swipe fees and that with no oversight, the credit card companies can make up the rules as they go.

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