Over the past several months, major retailers and credit card companies have been fighting it out over the concept of swipe fees. A tentative settlement was reached, but it appears that some major retailers are baulking at the terms and conditions of the agreed-upon resolution.
At the crux of the argument and disagreement, retailers are saying that the settlement does nothing to prevent the same problems from arising again – namely, that credit card companies would still have the power to increase fees as they see fit. Any agreement to the settlement by retailers would result in those companies no longer having a right to sue credit card companies over perceived injustices.
Major companies – including Target, Macy's, Lowe's and Walmart – filed a joint suit in U.S. District Court nearly two weeks ago, ahead of a deadline that required companies to either accept or reject the terms of the agreement. The settlement – which would consist of approximately $7.5 billion and be paid out to companies who were charged unfair transaction fees as merchants – aims to resolve a plethora of lawsuits against credit card companies by retailers that have been ongoing since at least 2005.
Anyone who accepted a Visa or MasterCard issued card between 2004 and 2012 would be eligible for some form of settlement, but one big criticism of the agreement is that very few businesses are aware of this deal. While many corporations have taken a proactive approach and watched carefully as this settlement has unfolded, many small businesses and merchants are not familiar with how this could impact them.
The lawsuits that have been filed claim that credit card companies and banks conspired to regulate swipe fees in such a way that credit card companies are able to set the fees, while the banks collect the vast majority of the revenue collected from them.
With much natural distrust of these two large entities and in broader perspective, the financial sector, many businesses are moving to protect themselves from unscrupulous actions taken by banks and credit card companies in the future. In many cases, the only way to do this is to avoid the settlement and begin a new round of litigation.