Settlement Approved Between Retailers and Credit Card Issuers

Jan 07, 2014
MasterCard and VISA credit cards are seen in this illustrative photograph taken in Hong Kong

U.S. District Judge John Gleeson has approved a new settlement between banks and retailers regarding credit card swipe fees. The case filed in 2005 by a relatively small group of retailers and merchants turned into a lengthy legal battle with over 400 depositions and an estimated 80 million pages of documents exchanged. The retailers and merchants originally filed the case to protest the pricing set by Visa, MasterCard, and banks that issue credit cards.

Judge Gleeson emphasized in his 55-page ruling the need to encourage competition through the settlement regarding credit card swipe fees. Credit card purchases are now permitted to have surcharges by the merchant or retailer on the transactions. Additionally, Visa and MasterCard are expected to pay an estimated $5.7 billion to the merchants and retailers who did not opt out of the case.

Not all retailers are happy with the settlement as a large number of them chose to opt out of the case’s payout. Retailers complain that the settlement fails to have countermeasures to prevent swipe fees from  rising in the future. They feel that the settlement’s falls short of protecting retailers from Visa and MasterCard’s anti-competitive behavior and that in the future the credit card giants may again create swipe fees that violate anti-trust laws.

Judge Gleeson’s solution to the hidden fees that so negatively impact retailers when handling credit card transactions is to permit merchants, for the first time ever, to display the fees to customers. The intention is to educate customers regarding banks’ credit card transaction processing and thereby influence their choice of payment method.

Retailers object to this facet of the settlement because not all retailers will display the fees as some state laws don’t allow the fees to be displayed and welter rules can make displaying the fees to the customer difficult for the retailer. Other retailers may not display the hidden fees as a competitive strategy as they would then appear to be ‘absorbing’ the fees and favoring their customers.

Time will tell the impact of the card swiping settlement with regard to retail practices, new merchant surcharges, and the new rules regarding hidden fees. Retailers are not universally happy with the resolution of the law suit of eight years despite the concessions and large payout on the half of Visa, MasterCard, and the banks. Judge Gleeson concluded in the settlement that even if Visa and MasterCard are practicing anti-competitive behavior that additional dominoes must first begin to fall before they can be hit with a successful anti-trust lawsuit.

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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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