Visa, Mastercard agree to lower swipe fees, settling long-running lawsuit

Visa, Mastercard and the largest U.S. credit-card issuing banks have agreed to a settlement with merchants that have been suing them for nearly two decades over the fees they charge for swiping credit cards.

In the deal, the credit-card networks and banks will lower the fees that merchants pay to accept credit cards. There is a range of these fees, typically referred to as swipe fees or interchange fees, but the average is about 2%.

The pact would lower the rates by 0.04 percentage point and keep them there for five years.

The proposed settlement would create some changes to give merchants more choice on accepting cards, allowing them to guide consumers to cards that have lower fees.

It would also give small businesses the ability to form groups to negotiate swipe fees, similar to what large retailers already do today.

The settlement requires approval from a federal judge in Brooklyn, N.Y. Earlier deals have dragged through years of rulings and appeals, which could happen again with this pact given the wide range of merchants involved and their varying opinions.

Visa said Tuesday it was making meaningful concessions to small businesses. Mastercard said the settlement will bring closure and value to business owners.

The legal team that struck this deal for the merchants said the settlement would provide immediate relief on fees and help eliminate restraints on their businesses.

Merchants first brought this contentious class-action lawsuit against Visa, Mastercard and banks in 2005. They alleged that the card network companies and banks have colluded to keep interchange fees inflated.

Interchange fees are set by the card network companies. Merchants then pay these fees to banks whenever consumers use credit cards to purchase goods and services. Though small individually, they add up to billions of dollars a year. The merchants wanted the ability to negotiate fees directly with the banks.

Visa, Mastercard and the banks have already settled part of the suit, agreeing to pay the merchants nearly $6 billion. Last year, an appeals court affirmed that settlement.

This new proposed settlement is to address the rest of the suit, where retailers wanted to address what they said was the anticompetitive nature of the card networks.

Visa and Mastercard face other battles over their dominance in the card industry.

U.S. senators are pushing legislation to give merchants the ability to process Visa and Mastercard credit cards over other payment networks.

There is also a bill aiming to cap the interchange fees on credit cards, similar to legislation that already regulates the fees on debit cards.

The Justice Department has asked for documents about debit cards in an antitrust investigation, both companies have said.