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Retailers will get $6B in fee-fixing suit against banks, credit card companies

By Associated Press

POSTED:



NEW YORK » Visa, MasterCard and major banks agreed to pay retailers at least $6 billion 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, announced late Friday, stores from Rite Aid to Kroger will be allowed to charge customers more if they pay using a credit card.

The pact, which is being called by lawyers involved in the case the largest antitrust settlement in U.S. history, is 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 percent each time a customer pays with a credit card. If bank card companies reduce the fees they charge her to 2.75 percent, 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 $30 billion per year. Mallory Duncan, senior vice president and general counsel for the group, said the settlement is a step in the right direction.

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 percent 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.






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cojef wrote:
Business ethics?? Where have you gone? Executives are only thinking about lining their pocket without paying any penalties, and in the meantime hurrying off to the banks with their loot. Problems is how to they divvy up the judgement money???
on July 14,2012 | 11:33AM
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