Retail group receives clearance to fight swipe fee agreement in court

A recent settlement between a number of retail groups involved in a class action suit and the world's two largest payment processors has drawn some ire from many major merchants, and now an influential organization may try to block it in court.

The National Retail Federation recently announced that it received clearance from its board of directors to go to court in an effort to block a proposed $7.25 billion settlement with Visa and MasterCard over the swipe fees those companies charge to merchants for processing debit and credit card transactions. The suit was the result of several actions originally brought by a number of groups independently, which were then merged into one, over what they believed were the rapidly rising costs of these transaction fees.

What the authorization entails
The NRF's board of directors gave the industry group, which has more than 3.6 million member businesses employing about 42 million workers, one in every four jobs in the U.S. overall,  clearance to pursue legal action to stop the settlement, the report said. As a result of the go-ahead, the NRF is now working to decide exactly what type of action it might take against Visa and MasterCard to block the final approval of the settlement, which many retail experts say could end up being more costly to merchants.

"The National Retail Federation categorically opposes the proposed settlement," NRF president and chief executive officer Matthew Shay said. "It does nothing to curb the anticompetitive behavior of Visa and MasterCard, and instead ensures that swipe fees paid by retailers and their customers will continue to rise while barring any future legal challenges. The proposal is a lose-lose-lose for merchants, consumers, and competition. NRF will take any and all steps necessary to oppose the settlement as it is currently proposed and will work toward real reform of the swipe fee system."

Specifically, the board of directors gave the NRF the ability to intervene in pending actions as a means of attempting to find a solution to the settlement problem that is equitable to as many merchants as possible, the report said. The problem is that the NRF isn't a party to the suit itself, and the judge in charge of the proceedings has neither outlined how outside organizations can step into the situation legally, or whether the case itself qualifies as class action.

The cost of these fees?
While merchants say that these swipe fees can cost them tens of thousands of dollars a year or more for even the smallest, privately-owned businesses, the NRF believes that that real victims are consumers, the report said. Swipe fees now generate about $50 billion in revenues for Visa and MasterCard alone every year, up 300 percent from the same point a decade ago. In turn, prices merchants have to charge the average household for the same items rose $427 per year over that time. However, the recent cap on debit swipe fees put in place by the Federal Reserve Board last year has helped to curb these costs somewhat. Credit card swipe fees, which remain uncapped, drive revenues to the tune of about $30 billion per year, costing the average household $250.

As far as retailers are concerned, that cost is often very difficult to bear, the report said. For most merchants, these fees constitute the second- or third-largest expense they face on an annual basis, trailing only employee salaries and, where applicable, healthcare coverage.

Reasons for the potential action
When it comes to the proposed settlement, the NRF is concerned about several factors, the report said. First is that it believes the $7.25 billion paid to merchants is simply not enough. In its estimation, had the case gone to trial and merchants won, the parties would have been entitled to as much as several hundred billion dollars, as the suits covered an eight-year period, and penalties for violating anti-trust rules have risen.

Further, and perhaps more important, is that the settlement does not prevent Visa and MasterCard from continuing to raise swipe fees in the future, the report said. This might allow the payment processors to recoup their $7.25 billion payout in a relatively short period of time. Finally, it also believes that the settlement should do more to reform how the companies set fees.

Some have expressed concerns that the settlement would end up costing consumers more, but if you're worried about the state of your finances, one good place to make your first attempts to repair them may be checking your credit report. This can help you to identify any potentially unfair markings that may be having a negative impact on your credit score, and working with a credit repair law firm can help to clear up these potential issues.