Security & Fraud

FTC Probing Visa, Mastercard About Debit Card Practices

U.S. antitrust regulators are investigating Visa and Mastercard about their debit card policies, Bloomberg reported on Thursday (Nov. 13).

The Federal Trade Commission (FTC) is talking to large merchants to discover if some retailers are being blocked from routing digital payments over alternative debit networks, sources told Bloomberg.

The inquiry could spell fresh regulatory trouble for the world’s two largest payments processors, which settled a protracted European Union antitrust probe in April this year over card fees.

A 2010 law known as the Durbin amendment — named for Illinois Democrat Sen. Dick Durbin — limits what can be collected for debit transactions. The law also requires that merchants have a minimum of routing options. 

“When chip cards began arriving in the U.S. roughly five years ago, they carried so-called application identifiers, or AIDs, which allow merchants to route debit transactions to their preferred network,” according to the Bloomberg report.

The regulator has probed issues related to debit routing in the past. Following an FTC inquiry in 2016, Visa revised a rule that required retailers to ask cardholders to choose a routing network for their debit card transactions.

In February, Visa and Mastercard, along with bank defendants, reached a settlement of about $6.24 billion from a class action suit. 

The lawsuit contended that that “Visa and Mastercard, separately, and together with certain banks, violated antitrust laws and caused merchants to pay excessive fees for accepting Visa and Mastercard credit and debit cards.” 

Merchants can either eventually file a claim and ask for payment, object to the settlement or exclude themselves from the settlement class. Those merchants that file a valid claim and do not exclude themselves from the settlement class “will get money from the class settlement fund” if the settlement is approved. A claim’s value is said to be determined by the “actual or estimated interchange fees” of a merchant’s payment transactions with Visa and Mastercard between Jan. 1, 2004 and Jan. 25, 2019. In the event that the court approves the lawsuit settlement, a deadline for claims would be set.

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