US: Visa, MC won’t drop swipe-fee offer despite opt-outs

Reports say more than 25 percent of the retailers offered part of the record $7.25 billion settlement over swipe-fees by credit card giants Visa and MasterCard have opted out of the settlement, reaching the threshold that gives the card companies the option to back out of the offer. The card giants, however, announced they would continue efforts to settle the matter.

MasterCard President and CEO Ajay Banga told shareholders that while the defendants in the case had the option to cancel the settlement, they “elected not to do so.” The remarks were made in a conference call on July 31, according to reports.

The settlement offer will go before a judge on September 12 in Brooklyn, New York for final approval. If cleared, the settlement will end the dispute, which has lasted for eight years, against MasterCard, Visa and various banks and the practice of swipe-fees, which charge retailers every time a consumer uses his or her debit card to pay. Despite the offer, some of the country’s largest stores have rejected the settlement, including Wal-Mart and Target. In total, nearly 8,000 companies have opted out of the offer, some even filing their own lawsuits against the defendants.

The settlement was tentatively approved last November. While the offer for $7.25 billion was originally estimated, lawyers representing the class of retailers predict the settlement could be reduced down to $1.25 billion in the wake of so many merchants opting out. Sought-after lawyers’ fees will also likely be reduced.

The news comes in the same week that the Federal Reserve announced it would appeal a recent ruling against the Fed’s swipe-fee cap, which found the cap to be higher than Congress intended and based on invalid data. US District Judge Richard Leon ruled last month that the cap, set at 21 cents, was too high. The Federal Reserve has asked for the cap to remain in place while its appeal is pending.

Unless the Fed is successful with the appeal, the judge’s decision against the swipe-fee remedy will require regulators to take another look at the case.

Full Content: Bloomberg

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