Visa and Mastercard to Pay Nearly $200M in Decade-Long Merchant Class Action

A nearly decade-old legal battle ended with Visa and Mastercard agreeing to pay a combined $199.5 million to settle claims by merchants alleging they were left to bear the costs of fraudulent transactions involving counterfeit, lost, or stolen cards. The proposed settlement was submitted to a federal court in Brooklyn and awaits judicial approval.

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Origins of the Lawsuit: Chargebacks and Merchant Costs

Merchants originally filed the lawsuit in 2016, accusing the payment giants of violating antitrust laws by coordinating changes to chargeback rules. Chargebacks are reversed payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term that occur when customers dispute charges, often due to fraud.

The change in rules made merchants responsible for these costs unless they updated their point-of-sale systems to accept chip-enabled cards. While merchants faced higher chargeback costs, transaction fees remained unchanged, escalating their financial burden.

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The settlement specifies that Visa will pay $119.7 million, while Mastercard will contribute $79.8 million. Earlier, Discover and American Express agreed to pay a combined $32.2 million to resolve similar claims.

None of the companies admitted wrongdoing by settling the class action. Mastercard released a statement affirming the resolution and reaffirming its focus on promoting technology to protect transactions at every stage. Visa and the merchants’ attorneys did not immediately comment.

Denials of Wrongdoing and Statements

Merchant plaintiffs' lawyers described the settlement Settlement Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Read this Term as an “excellent outcome for the class,” noting it equates to about 13% of their top damages estimate and over half of a conservative benchmark suggested by experts from Visa and Mastercard.

This settlement is separate from a larger $5 billion deal that Visa and Mastercard reached in 2019, addressing allegations of improper credit and debit card fee fixing.

This article provides financial and legal insight relevant to merchants and payment industry watchers alike, offering context for one of the significant ongoing antitrust settlements in the payment processing space.

Earlier, Visa and Mastercard agreed to pay a combined $197 million to settle the class action lawsuit. In the initial settlement, Visa was to pay $104.6 million, and Mastercard was to pay $92.8 million. Both companies denied any wrongdoing and have not admitted liability.