After years of lawsuits, Visa, Mastercard and the largest credit card-issuing banks have reached a settlement with merchants. They have agreed to lower fees for accepting credit cards, often called “swipe fees.”
The agreement means all rates will go down by 0.04% for three years. The average rate across all payment networks would fall by 0.07% for five years.
Lawyers for the merchants said the agreement would provide $30 billion in fee relief over five years. According to the Nilson Report, credit card companies collected $72 billion in total fees last year.
Steve Shadowen, co-lead counsel representing the merchants, said the settlement is a significant victory for both businesses and consumers.
"This settlement is the culmination of eight years of hard-fought litigation and detailed, painstaking negotiations,” Shadowen said. “It provides comprehensive market-based solutions to too-high swipe fees, while providing immediate fee relief to merchants as they make these new competitive tools work for them."
What’s in it for consumers?
Consumers might get some relief as well. In recent years, as swipe fees rose, many merchants began adding a 2% to 3% fee when consumers paid with a credit card.
Craig Sherman, a spokesman for the Merchants Payment Coalition, which lobbies for payment system reforms, says swipe fees are most merchants’ highest cost after labor and drive up prices by over $1,000 a year for the average family, adding to inflation. Before the settlement was reached, the Coalition was pushing for a legislative fix.
“The answer for saving on swipe fees is for Congress to pass legislation to make banks and card networks compete over these fees the same as other businesses compete over pricing, quality and service every day, Sherman said in mid-March.
Attorneys for the plaintiffs say the immediate effect of the settlement will be relief for merchants in the form of savings on swipe fees. They say they also expect substantially greater additional savings as the agreed-upon policy changes provide merchants of all sizes with new negotiating leverage against Visa and Mastercard.
It remains to be seen, however, how much of that savings gets passed along to consumers.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-03-27 13:08:36
