The two big card networks Visa and Mastercard are reported to be close to settling a 13-year-old legal challenge over interchange fees charged when merchants accept card payments, according to people familiar with the agreement.
The two companies and banks including JPMorgan Chase, Citigroup and Bank of America would pay merchants about $6.5 billion under the terms of the settlement,although the deal hasn’t been made public as yet.
10 Year interchange fees battle
The lawsuit, brought on behalf of 12 million merchants nationwide in the US, was filed more than a decade ago. A federal appeals court in 2016 rejected a $5.7 billion settlement of the claims, which centre on whether companies improperly fixed interchange fees, paid by merchants when consumers use credit or debit cards.
Mastercard said in a filing on Thursday that it will boost its reserves by $210 million this quarter “as a result of advances in negotiations related to the monetary damages claims.” Earlier this week, Visa said in a filing it had added $600 million to its litigation escrow account. Representatives for both companies declined to comment beyond the filings.
Visa already had about $884 million in its litigation escrow account as of March 31, the company said in a quarterly regulatory filing. Mastercard reported that it had reserved $737 million for the merchant litigation as of that date.
The new agreement doesn’t include provisions that held up the 2016 settlement attempt, including wording that would prevent merchants from ever suing again over interchange fees even if they don’t take money from this settlement.
“The parties worked with two well regarded mediators for more than a year to reach this agreement and I do not expect it to be controversial,” said Mitch Goldstone, president and chief executive officer of ScanMyPhotos.com, one of the most active class representatives in the interchange fee litigation.
The Wall Street Journal reported the agreement last week.