Merchants have spent the last few years in lengthy legal battles against major credit card-issuing banks over surcharges. Now, they have reached an agreement to settle the disputes. They have committed to reducing the fees associated with accepting credit cards.
Under the terms of the agreement, all rates will decrease by 0.04% over a three-year period. Additionally, the average rate across all payment networks is projected to drop by 0.07% over five years.
Legal representatives for the merchants say this agreement will mean billions in fee relief over the next five years. This is significant, especially considering that credit card companies made billions in total fees the previous year, as reported by the Nilson Report.
Consumers could benefit from this settlement as well. With the recent surge in swipe fees, many merchants began passing on a 2% to 3% fee to consumers paying with credit cards.
Craig Sherman, spokesperson for the Merchants Payment Coalition, which advocates for payment system reforms, highlights that swipe fees are a substantial expense for most merchants, ranking second only to labor costs.
He notes that these fees contribute to inflation, adding over $1,000 annually to the average family’s expenses. Before the settlement, the Coalition had been advocating for legislative intervention that would “make banks and card networks compete over these fees the same as other businesses compete over pricing, quality, and service every day.”
Attorneys representing the plaintiffs expect immediate relief for merchants in the form of reduced swipe fees due to the settlement. However, how much of these savings will be passed on to consumers remains uncertain.
Steve Shadowen, co-lead counsel representing the merchants, added: “This settlement is the culmination of eight years of hard-fought litigation and detailed, painstaking negotiations. 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.”
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