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The Massive Payment Card Interchange Fee Settlement – Everything You Need to Know
After more than a decade of litigation, one of the largest antitrust class action settlements in history between merchants and large payment networks Visa and Mastercard has finally been approved. In this comprehensive guide, we’ll break down all the key details about the $5.5 billion payment card interchange fee settlement including what led to the lawsuit, who qualifies to claim funds, how much money merchants could receive, and the latest updates on the process.
Background on the Lawsuit
The class action antitrust lawsuit, formally referred to as In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, was first filed back in 2005. The merchants who accepted Visa and Mastercard credit and debit cards as payment accused the brands and their respective bank issuing members of fixing interchange fees, also referred to as “swipe fees”, at anticompetitively high levels in violation of antitrust laws.
Interchange fees are small percentages, typically around 1-3% of a transaction amount, that payment networks charge merchants each time a customer makes a purchase with a credit or debit card. Merchants argued these fees were inflated due to anticompetitive practices like setting fee rates collectively and imposing rules limiting merchants from encouraging customers to use less expensive payment types. This effectively transferred billions of dollars from small businesses to the large card brands and issuers annually.
Over a decade of legal battles ensued including the case going all the way up to the U.S. Supreme Court before a settlement was finally reached. In 2021, a federal judge granted final approval for Visa and Mastercard to pay a total of $5.54 billion to $6.24 billion to a class estimated at have 12 million U.S. merchants as part of the settlement.
Who Qualifies for a Payment
To qualify to receive part of the settlement funds, a business must have accepted Visa or Mastercard credit or debit cards as payment in the U.S. between January 1, 2004 and January 25, 2019. This includes businesses both large and small across all industries from retailers, restaurants, grocery stores to gas stations, convenience stores, and more.
The only merchants excluded from participating are government entities, certain banks and credit unions, and larger merchants (those with over $850 million total dollar volume in card transactions per year during the class period). As long as a business processed one or more Visa or Mastercard transactions during this time frame, they likely qualify to put in a claim even if they no longer accept card payments today.
Calculating Individual Payments
Individual settlement payment amounts will vary depending on several factors including:
- A merchant’s estimated Visa and Mastercard card transaction volume over the class period – Merchants with higher annual transaction amounts may receive larger payments proportionally.
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The number of total valid claims submitted – The total settlement funds will be divided among all approved claims. So a larger number of claims means each individual payout decreases slightly.
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Business category type – Certain industries like gasoline retailers are estimated to get higher per transaction rates in their payments.
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Regional differences in interchange rates – Fees varied in different areas of the U.S. so locations with historically higher rates may see larger per transaction amounts applied.
The merchant’s own transaction records can be used to estimate a payment range, though no one can say definitively until all claims are received and the funds allocated. Average payments are projected to be in the hundreds to low thousands of dollars for most small businesses. But some estimates show potential maximums in the tens of thousands are possible for merchants with extremely high volumes.
Filing a Claim
The only way for merchants to receive part of the settlement is by filing an official claim online or via mail. Fortunately, the claims process was designed to be simple. All that’s needed is basic business identification and transaction volume information. No receipts or proofs of purchase are required to be submitted.
For the online claims portal, a merchant just needs their business legal name, physical address(es) where card payments were accepted, an estimate of annual Visa and Mastercard sales volumes, and to check a box agreeing to the terms. Alternatively, paper claim forms can be downloaded, printed, and mailed back for free postage.
The deadline to file claims was January 20, 2024. However, those who missed it should still check the official settlement website as supplemental claim windows may open in the future depending on the number and value of all initial claims received. Processing and distributing funds will likely take around a year once all filings are tallied and validated so final payouts wouldn’t arrive until late 2024 at the earliest.
Updates on Progress and Timeline
Since the initial January 2024 claims cutoff, more updates have emerged on the processing progress and timeline for this historic settlement:
- In May 2024, the claims administrator announced over 2 million claims had been filed worth a total estimated $8 billion in eligible transaction volumes.
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Additional supplemental filing periods were opened in September and November 2024 to try and capture any remaining eligible merchants who had not claimed yet.
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As of December 2024, the final tally was said to include over 2.2 million approved claims accounting for nearly $9 billion in approved transaction volumes over the class period.
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The claims reviewer is now working to calculate pro-rata payment percentages based on the total approved amounts. This should be completed by March 2025.
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From March to June 2025, notifications with official payment amounts will be mailed to merchants. Those not requiring additional documentation will receive checks shortly after.
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The entire distribution process is estimated to wrap up by the end of 2025, over 20 years since the original suit was filed.
Merchants are encouraged to keep an eye on the settlement website for any new announcements or timelines. But barring further delays, most will receive their payment share checks sometime in mid-to-late 2025 based on the current projected schedule.
Conclusion and Takeaways
While a long time coming, the multi-billion dollar payment card interchange fee settlement marks a massive win for small businesses that have been fighting credit card surcharges for over 15 years. Even if final individual payouts end up being relatively small amounts for each merchant due to the huge number of eligible claimants, proponents argue it’s still meaningful restitution for past alleged anti-competitive overcharges.
Overall, this historic case highlights the ongoing battles between large payment brands and merchants over ever-growing transaction fees. Even as digital payment options increase, interchange rates remain a sticking point. Yet the settlement approval sends a message that antitrust violations will not be tolerated where small business interests are concerned.
If you’re a business that accepted Visa or Mastercard between 2004-2019, claim your share of this settlement by keeping tabs on the official website for any updates. And stay tuned for final payment notifications rolling out over the next year as the largest class action payout in U.S. history is finally disbursed to its rightful recipients.
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