Understanding the Visa MasterCard Class Action Settlement

Many hardware stores have already seen, or should soon see, a 27-page Legal Notice arriving in the mail. Being too long and too complicated for most to try and read from cover-to-cover, this notice contains information about a preliminary settlement in a class action suit against Visa, MasterCard and their respective member banks alleging collusion to set interchange rates and a violation of U.S. anti-trust laws.

If approved by the Court, this settlement would allow any merchant that accepted Visa and MasterCard payments from 2004 through most of 2012 to file a claim and receive a small refund (cash settlement) on a portion of the interchange fees paid on both credit and debit card transactions during that time period.

In addition, at some point during 2013, merchants who are part of the settlement will receive a reduction on their current interchange fees of 10 basis points (1/10th of 1%) on all Visa and MasterCard credit card (not debit card) transactions for an eight-month period, effectively reducing their current processing costs. After the eight months, Visa and MasterCard would be under no restrictions to return the interchange rates to current levels, or even raise them if they so choose.

While the idea of receiving a cash settlement and reduced processing costs for eight months sounds appealing, merchants should be aware of certain trade-offs. If you agree to this particular settlement and the Court ultimately approves it, you give up your right to be part of any future claims or lawsuits against Visa or MasterCard regarding their interchange rates and other fees, their previous rules to not allow surcharging, their newly revised rules which allow surcharging only if stores meet certain requirements, and also the Visa and MasterCard rules on no discounting, honoring all cards, and many other edicts they dictate to the merchants. It’s telling that 10 of the 19 big retailers and associations who first brought the suit have fired their original lawyers and are now working against final approval of the settlement, believing that it’s not a good deal for them and retailers in general.

Fortunately, merchants have until May 28, 2013, to decide if they want to be part of this particular settlement or if they wish to opt-out. To be included, merchants need to take no action at this time. As a matter of fact, if you receive a settlement notice and take no action, you will automatically be included in the settlement and will be able to file a claim if and when the Court gives final approval. Only those merchants who pro-actively take steps by May 28, 2013, to opt-out of the settlement will be excluded, and by doing so they preserve their right to participate in, and benefit from, any future legal action against Visa or MasterCard.

Whether to opt-in or opt-out of this settlement is made more difficult without having a clearer understanding of the amount of money each merchant could potentially receive from a cash settlement. The settlement notification states that details about how all claims will be calculated will be available by April 11, 2013. Therefore, it may be best to simply wait for this information to be released before making any final decision to stay in or to opt-out.

One final word of caution. The process for filing an actual claim can’t even begin unless the Court gives its final approval to this settlement. That Court hearing is scheduled to begin September 12, 2013. In the meantime, many merchants are already being approached by outside companies offering to act on their behalf in filing a claim. In return, these companies ask to be paid a percentage of the claim. Before signing an agreement with any of these companies, MHA advises members to wait until more is learned about the claim-filing process. It could well be that the claim-filing process will be straight-forward enough that most merchants can easily file their own claims and keep 100% of any settlement proceeds, rather than sharing a portion with an outside company that provides little to no additional benefit. Don’t allow these companies to pressure you into signing with them now, as there will be plenty of time to file a claim sometime after the Court grants final approval to this settlement.