United States: Previously Banned Fees Charged To Consumers Now Permissible For Visa And Mastercard Transactions

In November 2012, the U.S. District Court for the Eastern District of New York preliminarily approved a settlement agreement in the In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. As a result, merchants may now charge their Visa and MasterCard customers supplemental fees to recover the cost incurred when credit cards are used as the form of payment.

The $7.25 billion settlement, reached in July 2012 between credit card issuers and merchants, is the end result of a class action filed in 2005. The plaintiffs alleged that card companies conspired with major banks to fix fees at an artificially high level that are charged to merchants when customers pay with credit cards. Some defendant banks issued the Visa and MasterCard branded payment cards to customers while other defendant banks acted as intermediaries between the merchant and the issuing banks. The interchange fees at the center of the case were paid by merchants when customers used Visa or MasterCard credit cards in their stores. Surcharges to recover such costs have customarily been prohibited by Visa and MasterCard under their respective merchant agreements. As part of this settlement, Visa and MasterCard were required to implement specified rule changes, including the ability for merchants in the United States and U.S. territories to surcharge credit card transactions beginning January 27, 2013.

The settlement was preliminarily approved by a federal judge of the Eastern District of New York on November 9, 2012, despite objections from named plaintiffs. As part of the settlement, Visa and MasterCard agreed to reduce the interchange fees paid by merchants for an eight-month period following the effective date of the settlement. After the eight-month period, Visa and MasterCard will begin allowing merchants to recover the previously-banned surcharges at the point of sale.

Under the proposal, to charge the customer a fee, a merchant must comply with certain requirements. First, a sur- charge payable by the customer is still not permitted in connection with debit or prepaid credit card transactions. Second, the merchant may only charge the customer for the actual cost of the transaction incurred by the merchant in connection with such transaction, but not to exceed 4 percent of the total amount of the charged amount. Third, the merchant must post notice both at the entrance of the merchant's store and at the point of purchase of the merchant's intent to charge its customers a fee. For online merchants, this notice must appear on the page where the availability of the use of credit cards is first mentioned. Finally, the merchant must show the amount of the surcharge on the receipt and disclose that the amount is equal to what the merchant pays to process such credit card transaction.

The terms of the settlement create multiple complications that a merchant must consider before imposing surcharges: the terms require merchants who charge fees on Visa or MasterCard transactions to charge the same fee on transactions where the credit card used carries an equal or greater interchange fee. Accordingly, under the terms of the settlement, a merchant must charge a surcharge on a transaction where the method of payment is some form other than the use of Visa or MasterCard, such as American Express. It is unclear whether American Express allows the imposition of a surcharge at this point. In the past, American Express has prohibited such a practice. Without clarity, it is uncertain if a merchant who accepts all three cards, i.e., Visa, MasterCard and American Express, will be able to charge fees on any credit card transaction including Visa and MasterCard without violating American Express policy.

A second complication that merchants must consider is that there are 10 states which do not allow the imposition of surcharges payable by the customer. Those states are: California; Colorado; Connecticut; Florida; Kansas; Maine; Massachusetts; New York; Oklahoma and Texas. Not only does this effect merchants in those jurisdictions, but it also is problematic for national chains, as existing Visa and MasterCard policies require merchants to handle credit card transactions in the same manner across all locations of that merchant. That is, for example, if a merchant operates in California, which prohibits charging a fee, that merchant cannot surcharge at any of its other locations, even where applicable state law would otherwise allow.

Named plaintiffs oppose the settlement arguing that a majority of the class will not be able to take advantage of the terms of the settlement because the laws of certain states prohibit the charging of surcharges, and because the settlement does little to inject competition into the market as was the intent of the claim. Several retail groups have opposed the settlement also arguing that it doesn't provide enough benefit for merchants and gives card companies too much leeway in the future to raise rates. Some large retailers, including Target Corp., Wal-Mart Stores Inc., and Home Depot Inc., have also spoken out against the accord. In early April 2013, the Retail Industry Leaders Association ("RILA") opted out of the settlement. RILA's action will likely lead a large number of its more than 200 members — which membership includes industry giants, Wal- Mart, Target Corp., and Best Buy Co. The accompanying message from RILA is that the settlement grants an overly broad release from liability and does little to stop growth in fees down the road.

On a related front, arguments were heard this month in federal court in Brooklyn, New York, over whether websites created by trade groups are misinforming retailers about the settlement. The sites encourage businesses to opt out and object to the settlement. After strong words condemning the actions of the anti-settlement retail groups, the judge gave the lawyers for both the pro- and anti-settlement retailers one week to submit proposals for suitable relief.

Merchants have until May 28 to object to or opt out of the settlement. A final approval hearing is now set for September 2013.


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions