Penalties for Visa, MasterCard and other card-issuing banks are $7.25 billion - $6.05 billion for past damages and the $1.2 billion for relief
Washington : Credit card giants, Visa and MasterCard, agreed to pay more than $6 billion to millions of merchants, who sued them for allegedly fixing card-use fees, reports PTI.
In a negotiated settlement to resolve a seven-year-old case, Visa agreed to pay about $4 billion to settle the class-action lawsuit, while MasterCard and other banks that issue cards and were also part of the suit, will pay around $2 billion, according to the documents filed in federal court in New York.
The two will also have to cut their so-called 'swipe' fees for eight months that could give the merchants another $1.2 billion in relief. They will have to allow the merchants to impose a surcharge on credit card transactions, subject to a cap.
The Law firm Robins, Kaplan, Miller & Cires, which represented about seven million merchants in the suit, said that the penalties for the two and other card-issuing banks added up to $7.25 billion - $6.05 billion for past damages and the $1.2 billion for relief.
Also involved in the settlement are the card-issuing banks including JP Morgan Chase, Bank of America, Citibank, Wells Fargo, Capital One and others.
Visa said that its total payouts would be $4.4 billion, which appeared to include settlements from separate individual suits over the same issue that were not part of the class-action suit.
"The reforms achieved by this case and in this settlement will help shift the competitive balance from one formerly dominated by the banks, which controlled the card networks, to the side of merchants and consumers," said Mr Craig Wildfang, lead Robins, Kaplan lawyer in the case for the merchants.
"Over time, the reforms induced by this case and in this settlement should help reduce card-acceptance costs to the merchants, which in turn, will result in lower prices for all consumers," he said.
But in a reaction, Frank Keating, president of American Bankers Association blasted the idea that the consumers will benefit from the deal. "Let's be clear - retailers, not consumers, benefit from today's resolution," he said.
"This settlement even provides merchants with the ability to impose 'checkout fees' on customers just for using credit cards. Only time will tell if this history will repeat itself, as retailers continue to show little regard for consumers," he mentioned.
Keating further added, "While the banking industry may not like all the results in this case, our industry is ready to put this matter behind us."
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