Visa, Mastercard, and merchants settle interchange fee lawsuit

A settlement between Visa, Mastercard, and U.S. merchants announced Monday aims to resolve a longstanding class-action lawsuit over credit card processing costs. The agreement was submitted to the Eastern District Court of New York for approval. The court rejected a previous settlement agreement in June 2024.

America’s Credit Unions is analyzing the full settlement for impact to credit unions. The credit card companies negotiated the settlement to address the interchange fee issue as an industry compromise to counter attempted government mandates, such as the previously introduced Durbin-Marshall “big box bailout” bill that is opposed by credit unions and other financial institutions.  

The settlement would break credit cards into three groups: commercial, premium consumer (with rewards), and standard consumer, and cap interchange fees at 1.25%. The reduction in interchange, coupled with other settlement terms, will likely impact credit card revenue. However, supporters of the settlement anticipate that these concessions will be more favorable in the long run than the alternative possibility of government intervention.

Specifically, the settlement:

• Gives merchants more options to surcharge, including if they do not surcharge other credit networks;
• Allows merchants to choose whether to accept U.S. credit cards in the three distinct categories—commercial, premium consumer and standard consumer;
• Provides for a reduction of the U.S. combined average effective credit interchange rate by 10 bps for five years;
• Will cap posted U.S. credit interchange rates for five years, and cap standard U.S. consumer credit rates at 125 bps through the term of the agreement; and
• Make available a new merchant education program about payment acceptance and cost management.