Mastercard’s Settlement Faces Backlash in Landmark UK Class Action Case

Mastercard’s recent agreement to settle a major lawsuit, which has been ongoing for years, has sparked controversy in the United Kingdom. The global payments giant reached a deal in December to pay £200 million to resolve the legal battle concerning credit card fees, a sum far smaller than the £10 billion ($12.6 billion) that was initially estimated. This deal is now drawing criticism, as it has raised concerns over the future of class action funding in the country.

According to Reuters, the settlement amount could mean that, if all 44 million claimants in the case sought a share of the payout, each would receive approximately £2.27. The case, which was brought forward on behalf of British consumers, was originally considered a potential landmark case for class action claims in the UK.

However, the deal has been opposed by Innsworth Capital, a funding firm that financed the case. Innsworth is set to receive half of the settlement funds, leaving the remaining £100 million to be distributed among the affected consumers. The company has argued that the settlement is unfair, given that it has spent over £45 million funding the legal battle, according to Reuters. Innsworth will receive its legal costs, plus an additional £55 million from the payout, which it deems insufficient in light of the substantial resources it committed to the case.

Read more: Mastercard Settlement Faces Challenge in Landmark Consumer Case

The Competition Appeal Tribunal in London now faces the task of ruling on the contested settlement, marking the first such dispute in the early history of the UK’s class action framework. This case represents a significant moment for the country’s emerging class action sector, and its outcome could have lasting effects on how future cases are funded and settled.

Adding further uncertainty to the landscape, a ruling by the UK Supreme Court in 2023 cast doubt on the legality of certain funding agreements. The ruling voided many existing deals, which could affect future litigation in the sector. Additionally, as Reuters notes, the Court of Appeal is expected to review the legality of funding agreements for other high-profile cases, including those against tech giants Apple and Sony, later this year.

The settlement deal has also faced scrutiny from Walter Merricks, the consumer advocate who led the case against Mastercard. Merricks, along with Mastercard, has pointed to economic analyses suggesting that the actual value of the claim is closer to £200 million, a far cry from the £10 billion initially projected. The substantial reduction in the value of the case, following several adverse rulings, has become a key element in the debate over whether the settlement is fair for the claimants.

Source: Reuters