WASHINGTON–Credit unions could potentially find themselves being dragged into a new battle—this time at the point of sale--following a court settlement that will allow merchants to adjust prices based on costs related to different cards, with the merchants also able to inform customers why their card costs more to use.
Merchants, meanwhile, are saying they are now going to be made out to be the “bad guys” in such situations.
Those scenarios are among the scenarios being forecast following a $30 billion settlement between Visa and Mastercard and a group of U.S. retailers.
As CUToday.info reported here, under the terms of the settlement, Visa and Mastercard will cap the credit interchange fees into 2030 and the companies must negotiate the fees with merchant buying groups.
The settlement is part of a lawsuit originally filed in 2005 that alleged that merchants paid excessive fees to accept Visa and Mastercard credit cards, and that Visa and Mastercard and their member banks acted in violation of antitrust laws.
The Specifics
Specifically, in addition to putting a ceiling on the swipe fees — an average of 2.26% of the transaction, according to Nilson data cited by the New York Times — Visa and Mastercard agreed to roll back the posted swipe fee of every merchant by at least 0.04 percentage points for at least three years. For five years, the companies will not raise the fees above the posted rates at the end of last year. Systemwide, the average fee must be at least 0.07 percentage points below the current average rate, a calculation that an independent auditor will verify, the Times analysis noted.
Merchants will also be permitted to adjust their prices based on the costs associated with accepting different cards, while letting customers know why some cards — typically business cards and those with more rewards and perks — cost more than others, the report added.
Concerns Raised
But while the plaintiffs in the case praised the settlement, plenty of others are raising concerns. The Merchants Payments Coalition, for example, again urged passage of the Credit Card Competition Act currently before Congress, legislation credit unions and other financial institutions adamantly oppose.
“The settlement does nothing to actually bring competitive market forces to swipe fees or change the behavior of a cartel that centrally fixes rates and bars competition,” Christopher Jones, a member of the coalition’s executive committee and senior vice president of government relations at the National Grocers Association, told the New York Times. “Instead, it tries to provide token, temporary relief and then allows the card companies to raise rates yet again.”
Doug Kantor, general counsel at the National Association of Convenience Stores, told the Times that provisions in the settlement that will allow merchants to charge more for credit cards that carried higher fees will be complicated to carry out and will pit merchants against their customers.
The ‘Tax Collector’
“Even if they do use them, it makes the merchants the tax collector for the charges — and it makes merchants the bad guy in the eyes of the consumer, when it’s really the credit card companies that are squeezing everyone when it comes to big fees,” Kantor was quoted as saying.
In a released statement following the ruling, the Merchants Payments Coalition again cited data showing credit and debit card swipe fees have more than doubled over the past decade to a record $172.05 billion in 2023, up from $160.7 billion in 2022, according to the Nilson Report.
“They are most merchants’ highest operating cost after labor and are too much to absorb, driving up prices paid by the average family by over $1,000 a year,” the MPC said.
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