The $7.25 billion settlement, the largest of its kind in history, is the end result of dozens of lawsuits filed by retailers in 2005 against card processing giants Visa and MasterCard, as well as several major banks, including JPMorgan, Citibank, Wells Fargo, Bank of America and Capital One.
Retailers allege that the card processors and banks colluded to fix debit and credit interchange fees and prohibit merchants from steering consumers towards cheaper forms of payment, Reuters reports.
“The money is significant but money is only temporary — it’s here today and spent tomorrow,” Mallory Duncan, the senior vice president and general counsel of the National Retail Federation, said. “What we need are changes in the rules that bring about transparency and competition that would be here for years to come.”
Retailers have long fought to be able to pass the interchange expenses to consumers, and, as part of the settlement, now have the ability to do so. Merchants can now charge American consumers a “checkout fee” at the register if they pay with debit or credit. The checkout fee is, however, limited to the cost of acceptance, and the merchant must notify and disclose the fee to the consumer at the point of entry, point of sale and on the purchase receipt.
The Electronic Payments Coalition, which has been active in following the battle over interchange fees, championed the use of the legal system to settle an industry debate.
“Consumers should be very clear – they didn’t see savings from the Durbin amendment, and they won’t see savings from this settlement either,” the group said on its website.