Mastercard & Visa address ‘pain points’ in $30bn settlement

Mastercard and Visa face MIFs class action lawsuit
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Mastercard and Visa have reached an estimated $30bn settlement to limit credit and debit card fees for merchants for at least a five-year period.

The antitrust settlement, which comes after nearly 20 years of litigation and is one of the largest in US history, will reduce credit interchange fees and then cap those rates into 2030.

Merchants, mainly small business owners, have criticised Visa and Mastercard for imposing high swipe fees, known as interchange fees, on transactions made with credit or debit cards.

Additionally, they have accused these companies of implementing “anti-steering” rules, which prevent them from guiding customers towards more cost-effective payment methods.

This agreement, between Mastercard, Visa and the court-appointed class counsel, hopes to offer merchants clarity and assurance regarding various aspects of accepting payment cards.

The first notable change that merchants will experience is the interchange rate reduction. Payment networks, such as Mastercard, will decrease the published and effective interchange rate for consumer and commercial credit transactions issued in the US at merchant locations.

Secondly, there will be a five-year rate cap, with the interchange reduction acting as a cap for a duration of five years for all credit programs issued in the US, including newly mandated products under the Mastercard brand. 

This initiative aims to provide merchants with assurance and transparency regarding their acceptance programs while creating ongoing competition within the industry.

Finally, there will be simplified surcharging and discounting rules. As per the settlement agreement, the networks will implement a streamlined approach to credit card transaction surcharging, offering merchants greater flexibility. 

These revised rules will uphold essential consumer safeguards and transparency, replacing previous standards that were revised in 2012.

Rob Beard, Chief Legal Officer, General Counsel and Head of Global Policy at Mastercard, said: “This agreement brings closure to a long-standing dispute by delivering substantial certainty and value to business owners, including flexibility in how they manage acceptance of card programs.

“As the court reviews the settlement, we will focus our energy on continuing to provide consumers, small businesses and all business owners what they expect from Mastercard – a better payments experience, strong value and peace of mind.”

This isn’t the first time the two payment giants have been accused of inflating fees. In 2023, Block, formerly known as Square, filed an antitrust lawsuit against Visa and Mastercard over accusations of inflated fees and alleged attempts to elevate retail prices. 

This settlement is pending final approval by the Eastern District Court of New York. Once the court grants final approval of the class settlement, Mastercard and Visa have said the firms will have addressed the majority of ongoing US merchant litigations.

Additionally, Mastercard and Visa have said that, while agreeing to the settlement, the companies do not acknowledge any wrongdoing regarding the plaintiffs’ allegations.

Kim Lawrence, President of North America at Visa, commented: “By negotiating directly with merchants, we have reached a settlement with meaningful concessions that address true pain points small businesses have identified.”

It is important to note that this deal is still subject to court approval.