Two Major Results of the Visa/Mastercard Lawsuit Settlement

Published 08/10/2012

In July Visa and Mastercard announced that they had reached an agreemnt to settle a longstanding multi-billion dollar lawsuit with U.S. Retailers.  If both parties agree to this settlement the following will be the highlights of what you can expect to see changing in the payments processing industry:

1.  A reduction in interchange costs.  After this initial reduction though retailers will be barred from taking any other legal action - in effect preventing any future regulation of interchange costs.  This presents a short term benefit to businesses - but a huge long term benefit to Visa and Mastercard as they are no longer going to have the possibility of new legislation ( see the Durbin Amendment) affecting their business models.

2.  The ability to surcharge card holders.  Up to this point businesses have not been allowed to charge customers for using their credit card to pay for items.  (Although some still break this rule.  Try putting a large deposit down on a new car and more often than not the car dealer will try to stick you with a fee to cover their costs.)  If this lawsuit is settled as proposed this will no longer be the case.  Businesses will be able to pass their processing cost on to the consumer.  The question is whether or not the consumer will put up with this change.  If one business is surcharging and another is not chances are the consumer will show their discontent by moving their business.  The real beneficiaries of this change are going end up being high ticket retailers. (Jewelers, car delaers,  wholesalers, etc.)

Of course these changes taking place are dependent on both sides agreeing to the settlement.  Who will the real winner be if this settlement is finalized?  With a clear future of no new lawsuits or legislation for Visa and Mastercard i would say they are going to be coming out on top this time.

Read more about the Visa/ Mastercard lawsuit here.

 

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