UK firms urged to join lawsuit against Visa and Mastercard

Mastercard and visa plastic electronic credit cards macro close up. ISTANBUL, TURKEY - February 2022.
Editorial credit: olgsera / Shutterstock.com

Commercial law firm Harcus Parker has called on larger UK companies to join the class action lawsuit against Mastercard and Visa over Multilateral Interchange Fees (MIFs).

UK businesses have two weeks to opt-in to the class action, which claims that businesses are being overcharged interchange fees when customers pay via commercial cards.

Although EU law has capped MIFs at 0.3% for consumer credit cards and 0.2% for debit cards since 2015, the limit does not extend to corporate cards or inter-regional transactions. 

Corporate card transactions can still attract fees as high as 1.8%, and Harcus Parker argues that these fees should not apply. The lawsuit asserts that such charges have led to UK businesses losing an estimated $4bn.

Stephen Allen, the Director of the Class Representatives, said: “MIFs are like a tax on businesses and charities, increasing the cost of accepting commercial card payments. This claim enables justice for years of being squeezed by these global card schemes.

“The thousands of people who donate online or support UK charity shops will be shocked and disappointed to learn how much money charities have lost because of excessive card fees. We hope Mastercard and Visa will stop punishing charities who accept commercial card payments by removing these onerous fees.”

Businesses with an annual turnover of under £100m, which already accept commercial cards, are automatically included in the class action but have been encouraged to register nonetheless. 

However, Harcus Parker is trying to muster more support for its legal challenge by widening the net. Companies which had an annual turnover of £100m between 2016-19 have until 10 February to join.

Although the case has been ongoing for several years, it took a significant step forward last August when the Competition Appeal Tribunal approved the class action to proceed. 

According to Harcus Parker, a variety of businesses, including retailers, charities, universities, travel and hospitality companies, football clubs and others, have already joined the claim.

Jeremy Robinson, a Partner at Harcus Parker Limited, representing the Class Representatives, said: “Hundreds of larger UK firms have just two weeks left to join this claim and seek their due compensation from Mastercard and VISA.

“Class action litigation is the best way to ensure Mastercard and Visa stop these unlawful charges on businesses.”

Mounting pressure on the ‘duopoly’ of Mastercard and Visa

Mastercard and Visa are two of the largest financial institutions globally, holding a dominant position in the card issuance market. This has led to some concerns about the potential impact the duo’s dominance may have on competitiveness.

A recent market review by the Payments Systems Regulator (PSR) revealed that in 2021 and 2022, both companies significantly raised cross-border fees, with debit card fees increasing from 0.2% to 1.15% and credit card fees rising from 0.3% to 1.5%. 

Alternative Payment Methods (APMs) have long been seen as a potential solution to challenge this duopoly, offering businesses and consumers an alternative to cards. APMs are thriving in regions like South America, Asia and Africa, with Brazil’s Pix standing out as a notable success.

However, in traditional markets like the US and Europe, encouraging a shift from cards to APMs has proven to be slower, despite recent growth in adoption. Visa and Mastercard have proven adept at offering new solutions to deal with challenges, however.

A recent example of this was when Visa proposed an Account-to-Account (A2A) payment scheme in the UK, which was met with opposition from stakeholders. In response, the Financial Conduct Authority (FCA) and the PSR chose to support an independent company instead.

Another factor to consider, however, is that some UK retailers and charities – including those Harcus Parker is trying to court to support its lawsuit – may simply prefer the Mastercard and Visa offer as opposed to alternative solutions.