Visa and Mastercard have reached a proposed settlement, subject to court approval, in a class-action lawsuit over billions of dollars in “swipe fees” that merchants must pay.
If approved, the settlement would end two decades of litigation by temporarily lowering interchange fees and giving merchants more power to reject certain Visa and Mastercard branded credit cards that carry swipe higher fees, such as rewards cards.
The National Retail Federation, however, said the proposed settlement is “window dressing and no substance” and called for it to be rejected.
“This is the third attempt to settle this case, and the card industry either just doesn’t get it or just doesn’t care,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said. “Once again, this proposal is all windows dressing and no substance.”
Martz said the reduction in swipe fees doesn’t begin to go far enough, and the change in the honor-all-cards rule would accomplish nothing.
“If the courts can’t fix this, it’s time for Congress to take action," Martz said.
As part of the proposed agreement, Visa and Mastercard would reduce the average effective interchange rate — a measure of the fees that retailers pay when customers use cards at checkout — for U.S. credit-card purchases by 10 basis points (0.1%) for five years. Standard U.S. consumer credit rates will be capped at 125 basis points (1.25%), according to regulatory filings.
In March 2024, the two sides reached a deal to lower interchange fees by 0.07% over seven years, but the proposed settlement was rejected by a federal judge who said it did not adequately address the price-setting structure.
The Merchants Payments Coalition (MPC) also criticized the latest settlement proposal, saying it is only a fraction of the average 2.35% swipe fee charged to merchants to process transactions in 2024 and is roughly equivalent to the increase from 2023, when swipe fees averaged 2.26%.
MPC Executive Committee member and Food Industry Association Chief Public Policy Officer Jennifer Hatcher noted it would apply to interchange, the portion of swipe fees that goes to card-issuing banks, but there was no indication of a limit on network fees, which go to Visa and Mastercard.
“The miniscule reduction proposed in the settlement on bank fees could still allow Visa and Mastercard to be able to raise their own fees without any limits,” Hatcher said. “All of the supposed merchant and consumer savings could easily be canceled by Visa and Mastercard increasing their fees.”
