3/27/2013 

BPAA Merchants and the Proposed Visa/MasterCard Settlement

Visa - Mastercard

Back in 2005, a group of merchants filed a lawsuit against Visa and MasterCard over a number of issues related to the credit issuers’ unfair practices in 

setting transaction/interchange fees. (While the legal battle was underway, the merchants also engaged in a number of legislative initiatives designed to change the payment structure, and they eventually succeeded in capping the fees charged for debit card transactions.)

In July 2012, a preliminary settlement was announced between card issuers (and banks that issue Visa and MasterCard) and the attorneys representing the merchant community. However, because many merchants disagreed with the terms of the settlement and appealed the agreement, it took a few months for a judge to decide on the settlement terms. Despite the objections of major merchants, the settlement terms were given preliminary approval by a US District Court judge on November 27, 2012. In brief, the card issuers and banks agreed to pay roughly $7 billion (some in attorney’s fees) to the merchants and reduce their rates temporarily.

The settlement also forced the card issuer to change some policies that apply to merchants accepting Visa and MasterCard. Some things that will change:

Merchants are allowed to charge an extra fee to those customers who pay with Visa or MasterCard credit cards. (Conventional wisdom is that very few retailers will take advantage of this surcharge option.)

  • Merchants can offer discounts to customers who use forms of payments that are less expensive than Visa or MasterCard credit or debit cards. (Merchants have been allowed to offer discounts on debit card transactions only, as a part of the implementation of the Durbin Amendment that capped debit card transaction fees.)
     
  • For those businesses with multiple locations, they no longer have to accept Visa or MasterCard at all of their locations, trade names, or banners. 
     
  • Merchants can form “buying groups” that meet certain criteria to negotiate with Visa and MasterCard.

Even though the settlement isn’t final, some of the terms of the settlement will begin to go into effect on January 22, 2013 (or 60 days after the preliminary approval was granted). However, the settlement payments will not begin until the settlement is finalized, which could happen after a hearing on September 12, 2013.

Objections and Opting Out

Many merchants and trade groups do not agree with the settlement. They feel the amount of the awards will be too low and think it is unfair that merchants will be unable to sue going forward. The settlement terms actually allow merchants to object to the agreement (whether in writing or in person), or even to opt-out of the settlement altogether. Merchants have until May 28, 2013 to issue a written objection or to opt-out, and the final fairness hearing will be on September 12, 2013 in New York.

For more information on merchants’ rights, review the attached notice or go to: https://www.paymentcardsettlement.com.

Preregistration and Obtaining your Claim

Merchants who did business with Visa or MasterCard between January 1, 2004 and November 28, 2012, should receive information about the settlement in the mail, and you automatically will be sent a claim form if the settlement is approved in September. However, merchants with more than one location or franchise that accepted Visa/MasterCard will be able to pre-register starting January 28, 2013, with a form that will be on the website (www.paymentcardsettlement.com). Anyone who accepted Visa/MasterCard within the 2004-2012 time period but who didn’t receive the settlement mailing can also use the form to submit contact information.

Please note that there are specialized companies or settlement negotiators that may offer to fill out and file your claim in return for a percentage of the value of your claim. Before you agree to that, however, take a look at the claim form and the kind of information you will need to provide. It may be that the process is very easy for you and you will not have to hire a settlement negotiator.

You can always contact the Class Administrator or Class Counsel, and you will not be charged for those contacts. The information on Class Administrator and the Class Counsel and how to contact them is available in the following document and on www.paymentcardsettlement.com.

 

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