Visa, Mastercard Face Potential £5 Billion UK Class Actions Over Card Payment Fees

The legal actions, brought by law firms Harcus Parker and Hausfeld, challenge the interchange fees charged on transactions involving consumer debit, credit and prepaid cards, according to Law360 and reports published Monday by the Law Society Gazette and the Guardian.

The claims were filed with the UK’s Competition Appeal Tribunal and could become among the country’s largest competition-related compensation proceedings. They seek damages for businesses that allegedly paid excessive transaction charges from October 2020 onward.

The proposed litigation is being led by Stephen Allen, a former executive at Portman Travel who has pursued legal challenges involving card interchange fees since 2021. The lawsuits would cover businesses across the UK, from independent retailers to major national companies.

Under the proposed class-action arrangements, approximately one million businesses, organizations and charities with annual revenue below £100 million would be included automatically if the tribunal authorizes the proceedings, unless they choose to opt out. Larger companies would be required to join the litigation voluntarily, according to the Guardian.

At the center of the dispute are multilateral interchange fees, which Visa and Mastercard establish within their payment systems. The charges are paid by merchants through their acquiring banks when customers use payment cards and account for a significant portion of the cost businesses incur to process transactions.

The claimants contend that the fee arrangements have restricted competition and resulted in businesses paying more than they would have in a competitive market.

Mastercard rejected the allegations, maintaining that interchange fees are essential to the operation of a secure and efficient payment system. The company also criticized the litigation as speculative and driven by third-party litigation funding, according to the Law Society Gazette.

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Visa has similarly defended interchange fees, arguing that they support the broader payments ecosystem, benefiting consumers, merchants and financial institutions, according to the Guardian.

The proceedings add to mounting legal pressure on the two payment networks over their pricing practices in Britain.

Earlier in October, a separate proposed class action sought more than £700 million in compensation over fees imposed on transactions involving cards issued in the European Economic Area. That case alleges that charges on certain cross-border payments rose substantially after Brexit, when European Union fee restrictions ceased to apply to the transactions.

The earlier lawsuit, led by former UK competition regulator Ann Pope, seeks compensation on behalf of approximately 126,000 British businesses, according to the Global Legal Post.

The latest claims also follow years of litigation over whether interchange fee arrangements breach competition law and how any resulting losses should be allocated among merchants, banks and other participants in the payment system.

For Visa and Mastercard, the new proceedings underscore the continuing legal uncertainty surrounding a major component of their payment networks’ economics. For British businesses, the litigation could provide a route to recovering transaction costs that claimants argue were unlawfully imposed.

The Competition Appeal Tribunal must determine whether the proposed collective actions can proceed. The £5 billion figure represents potential compensation sought by the claimants, rather than an established liability or court-awarded amount.

Source: Law360