Retailers File Anti-trust lawsuit against Visa and MasterCard

Now that debit card swipe fees retailers pay to the debit card issuers have been reduced from $.44 to $.21 (plus.05  percent of the transaction), retailers also want to pay a lower interchange fee on Visa and MasterCard credit cards. They claim that the Visa and MasterCard have set prices that are unfair and would be lower in a competitive market. The average interchange fees are two percent for credit card transactions.  The retailers are trying to get them down to .5 percent.

Retailers Involved

Approximately five million retailers are suing Visa, MasterCard, and major banks.  The retailers include The National Association of Convenience Stores (NACS) and The National Restaurant Association. Ten larger retailers including Kroger and Walgreen have opted out of the class.  Some of the banks being sued include: Bank of America, Barclays, Capone, Chase, Citigroup, 5th Third Bancorp, HSBC, JP Morgan, PNC Bank, Sun Trust, US Bancorp and Wells Fargo.  The suit won’t go before the U.S. Eastern District court until September12, 2012.

The loss would be billions of dollars annually to the Master Card, Visa and the banks.  In addition, the law suit alone could cost billions.

Walmart class action suit

A similar class action anti-trust law suit led by Walmart and Limited Brands sued MasterCard in 1996 and was settled in 2003. They claimed MasterCard required them to accept both debit and credit cards issued by MasterCard.  The interchange fees were higher for debit cards. The retailers won the suit and were paid $3 billion by MasterCard and the issuing banks in damages and had to change some business practices costing another $25 billion.

It will be interesting to see how this plays out.  This would be the largest class action suit in U.S. history.  If the plaintiffs win, we could expect more and higher bank fees to make up the loss.  Since retailers would pay a lower fee, would they pass that on to consumers?  Have any of your retailers passed along discounts based on the debit card swipe fee reduction? I personally haven’t noticed any savings from my retailers.

Credit Expert Witness, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Civil Penalty, Credit Cards, Debt, Financial, Government, Money & Identity, Saving Money

This post was written by John Ulzheimer