American Express Settles Legal Challenges from US Merchants

Jan 07, 2014

American Express has agreed to settle two class action lawsuits filed by various US merchants pending approval by the courts. The first lawsuit, filed in 2006, regards the non-discrimination provisions in the company’s merchant contracts. The second lawsuit from 2004 regards American Express’ Honor All Cards provisions. American Express hopes that the settlements will be in balance for both the interests of American Express, card holders, and merchants.

The settlement has four main tenants regarding the lawsuits:

  • Should a merchant surcharge American Express credit card holders the surcharge will be no more than the surcharge for any of American Express’ competitors.
  • The same is true for prepaid or debit cards, the surcharge for American Express will not exceed that of any competitor.
  • American Express will pay attorney fees for both lawsuits to a maximum of $75 million.
  • Any merchants that seek individual lawsuits for damages relating to either the non-discrimination provisions or the Honor All Cards provisions will be limited to time prior to this settlement
  • Merchants will not file any more lawsuits regarding the above mentioned provisions for a minimum of 10 years following the settlement’s approval.

This settlement is arranged to help protect American Express by ensuring merchants won’t use surcharges to steer customers away from using American Express cards. Simultaneously, American Express will be protected from future lawsuits for a minimum of 10 years while providing merchants with flexibility at the point of sale. American Express will compensate for the fees regarding the lawsuits and limit any potential damages from future, individual legal challenges.

Ultimately, American Express lacks the market power of Visa and Mastercard and seeks to remain competitive with the two larger companies. Through this settlement, American Express addresses merchant concerns while protecting American Express members from elevated surcharges at the point of sale.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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