Archive for the ‘Credit Cards’ Category

Retailers’ Appeal of the Credit Card Fee Settlement Gets Deferred

Thursday, December 27th, 2012

Immediately after the $7.25 billion Visa/Mastercard settlement received preliminary approval, retailers all over the country such as Wal-Mart Stores Inc., Target Corp., the National Association of Convenience Stores (NACS) and others voiced their objections and filed notice to appeal U.S. District Judge John Gleeson’s order. The plaintiffs state that the settlement violates their rights by preventing them from opting out; they are specifically challenging a part of Gleeson’s order that would release Visa and MasterCard from new legal claims over any related issues.

To recap what the settlement entails, the $7.2 billion deal seeks to resolve seven years of litigation regarding allegations that credit card companies and banks were fixing credit card fees (swipe fees). Stores are charged a fee every time one of their customers makes a purchase using a card, which translates to roughly $30 billion in swipe fees per year.

Recently, a U.S. Appeals court refused to hear the expedited appeal of the preliminary approval. The 2nd U.S. Circuit Court of Appeals in New York denied one of the objecting Merchants, The Home Depot, and said all other objecting parties’ briefs should not be filed until the U.S. District Court for the Eastern District of New York has issued final approval of the settlement, which is expected to be scheduled sometime in 2013.

Not all merchants oppose the deal, but dozens of retailers, including the world’s largest retailer (Wal-Mart), firmly hold that the deal offers meaningless relief for merchants; however, their quest to take down this settlement has been put on hold for now.

Depending on the Credit Transaction Level I, II, and III, a Vendor and Customer May Qualify for a Lower Interchange Rate

Friday, November 9th, 2012

Depending on the detail of the information that is passed on with the credit transaction (in the Business to Business setting there exists three levels), the transaction may qualify for a lower interchange rate. The lower interchange rate given from the credit card companies to the vendor can then be passed on from the vendor to the customer via a transparent surcharge if the settlement agreement is approved and adopted. This will effectively reduce prices for the customer. Below are the three levels and the information necessary to reach each level.

How the Credit Card Settlement Will Affect the 10 States That Have Prohibitive Laws Regarding Surcharging?

Friday, November 2nd, 2012

In light of the pending Credit Card Settlement Agreement, that if approved would allow vendors to pass on any surcharges from the credit card companies to customers, 10 states still have codified statutes that prohibit surcharging.

The 10 prohibitive states are California, New York, Florida, Texas, Kansas, Oklahoma, Maine, Connecticut, Massachusetts, and Colorado. Many of the states on the list are major players in the national economy.

The language from the California version of the code states:

A Hypothetical Timeline for the Credit Card Settlement Agreement and the Ramifications that Will Ensue

Monday, October 29th, 2012

For the settlement agreement to become effective the court, in which the case sits, must give a preliminary approval regarding the agreement. With that said, it is essential to understand the time constraints and proper dates associated with the effective agreement. A hypothetical scenario follows below and can be helpful in understanding the time constraints associated with the agreement.

If the settlement were to go into effect on Oct. 1, 2012, then there is a 180 day period for the interested parties and participants to opt in or out of becoming part of the binding agreement. This period is called the exclusion period. The 180 day period runs from Oct. 1, 2012 to March 30, 2013, at which point the class will vote to ratify the agreement if at least 75% of the dollar amount in the class joins to do so.

Giving the Customer and the chosen Credit Card Company Advanced Written Notice of An Intent to Impose a Surcharge Within 30 days

Monday, October 22nd, 2012

If the settlement agreement in the Credit Card Companies case is approved by the court and agreed to by the class then vendors will be able to pass surcharges incurred in using a credit card for a transaction on to its customers.

However, prior to passing on any surcharge, the vendor must, within 30 days prior to the surcharge fee being passed to the customer, give advanced notice of intent to impose a surcharge to the Credit Card Company chosen for the transaction and to the customer.

The notice must show that the vendor intends to impose surcharges, which shall identify whether the merchant intends to impose surcharges at the brand level or the product level. The notice must also provide clear disclosure to the merchant’s customers of the merchant’s surcharging practices, at the point of interaction or sale with the customer, in a manner that does not disparage the brand, network, issuing bank, or the payment card product being used.

An Historical Primer to the Largest Anti-Trust Settlement in History and the Changes That Will Affect Credit Card Companies

Friday, October 19th, 2012

In 2011, VISA and MasterCard accounted for more than 80% of United States credit and debit purchases. Despite the frequency with which customers use credit cards as a method of payment, certain policies implemented by credit card companies have made vendors reluctant to accept this form of payment. Traditionally, credit card companies have prohibited vendors from surcharging customers who use their cards. This places the burden on vendors to absorb interchange or “swipe fees.” Interchange fees, which are between 1% and 3% of the overall purchase, are incurred every time a vendor processes a credit card transaction, which amounts annually to roughly $40 billion to VISA to MasterCard.