All About Visa Lawsuits

After a multi-year delay, one of the longest tenured class action lawsuits in American history received the thumbs up to restart in 2019. The National ATM Council, Inc. and 13 independent ATM organizations filed the original class action lawsuit against both Visa and Mastercard in 2011. Plaintiffs behind the original class action lawsuit alleged the two credit card processing companies restrained trade in violation of the Sherman Act. Attorney Jonathan L. Rubin said in an interview that the plaintiffs are seeking “hundreds of millions” of dollars in monetary damages from Visa and Mastercard.

The United States District Court overseeing the case dismissed the original class action lawsuit, but in 2015, a federal appellate court reinstated the case for fast track to a hearing. Since 2015, lawyers representing both sides have engaged in extensive discoveries and depositions in an attempt to avoid a protected court battle. Rubin expects the judge presiding over the case to issue a ruling sometime in the second half of 2020, although the timeline is subject to change because of the backlog of cases caused by the Coronavirus outbreak.

ATM merchants allege Visa and Mastercard created procedures that prevented the companies from applying surcharges for out of network transactions. “We’re calling it price fixing,” said Rubin. “Every network doesn’t cost the same. Because differential surcharging is not allowed…Visa and Mastercard can continually raise their fees without losing any volume.”

Visa and Mastercard, along with several large banks based in the United States, agreed to pay from than $6 billion to settle a class action lawsuit filed by American retailers. The retailers filed the class action lawsuit because of excessive swipe fees. Every time a customer uses a credit card processed by Visa and Mastercard, the business consummating the transaction pays a fee for processing the credit card.

Although the original settlement in 2012 awarded plaintiffs more than $5.4 billion, a new class action lawsuit boosted the number of plaintiffs to increase monetary damages. The result is a payout that is almost $900 million more than the 2012 financial award. Visa is on the hook for more than $600 million of the additional $900 million in monetary damages. After a prolonged legal battle, Visa released a press statement that stated the settlement was an important step to end the class action lawsuit.

“After years of thoughtful negotiation, we are pleased to be able to reach this agreement and move forward in our partnership with merchants to provide consumers convenient, reliable, secure ways to pay,” said Kelly Mahon Tullier, Visa’s general counsel. 

However, many of the largest retailers in the United States, such as Target and Walmart decided not to participate in the settlement. One of the plaintiff attorneys, Patrick Coughlin, said, “The top 1% of the merchants make up 25% of the nation’s commerce. They were never going to be part of the deal. But this is important for the other 99% who handle the other 75% of purchases.” Coughlin went on to state the new class action settlement is much better for smaller retailers, since large corporations have dropped out of the case.

It is not just the United States where Visa has landed in legal hot water. The international credit card company has run afoul of several European antitrust statutes as well.

In 2002, the newly created European Commission (EC) gave Visa an exemption from the organization’s anti-competition provisions. The exemption allowed Visa to continue charging multilateral interchange fees. The EC cancelled the exemption just five years later because as EC Commissioner Neelie Kroes mentioned in an interview, the “present level of interchange fees in many of the schemes we have examined does not seem justified.”

Another antitrust case reached the litigation stage in 2010, when Visa settled with the European Union by agreeing to reduce the payments made by banks on a debit card purchases to 0.2 percent. A senior official of the European Central Bank called for the issuance of a new European Union backed debt card for consumers to use within the Singe Euro Payment Area (SEPA). The goal was to diminish the influence Visa has in the European payment system.

Passed by the United States Congress in 1970, the Fair Credit Reporting Act (FCRA) regulates the collection and transferring of consumer credit data, as well as establishes guidelines for each of the three major credit reporting bureaus to follow. As a processor of credit card payments, Visa has come under increasing legal scrutiny for sharing inappropriate consumer credit information with Equifax, Experian, and TransUnion. Although the COVID-19 outbreak has dramatically changed the schedule for litigating class action lawsuits, many legal experts expect some type of FCRA case to reach a civil court by the end of 2020. Whether Visa is named in a class action lawsuit pertaining to the FCRA remains unclear.