Credit Card Companies Agree To Pay Over $6 Billion In Decade Old Lawsuit

Visa, MasterCard, and a number of US banks have agreed to pay an unprecedented 62 billion dollars to settle a long-running lawsuit brought by merchants over the fees they pay when they accept payment a card

This sounds like a big number, Mollye Yes But, you know, the truth is, it's not, because, how much did the companies make? They're paying out 62 billion dollars for fraud That's what we're talking about

Correct They kept it a secret It's fraud First of all, explain the case briefly And tell us how much they made doing this

Sure What's interesting to me is that this lawsuit was filed a decade ago, over a decade ago, in fact, 2005 So they've been going at this for some time The National Retail Federation is heavily involved now, but they were not involved in the initial lawsuit, which was brought on by thousands of retailers who were saying, "Hey, you're jacking up our costs with these swipe fees," which is basically the cost of doing business for a bank card They said, "We can't keep passing these costs onto our customers

It's 2%-4% They're not gonna buy as much when they're in our stores We can't give them other options You're prohibiting us by your policies from giving these customers other options on how to pay for their items And this is basically cutting into our bottom line, because it's hurting our business

" So this has been going back and forth for some time with some attempts towards a settlement, the Supreme Court got involved at one point Why did the Supreme Court get involved? First of all, the settlement was thrown out to begin with, by a federal judge, the initial settlement Tell me about that Yes Basically they did come to a settlement

At one point, that was gonna be about 57 billion But 8000 retailers had dropped out by that point, so it almost took the heart out of the case, and the Supreme Court said, "Let's table this" Then the National Retail Federation got involved They appealed it

That's how it got tabled, basically They appealed it, then the Supreme Court upheld that appeal, which allowed the case to move forward and basically be heard again So this is a result of that case being heard again, although the National Retail Federation still isn't extremely happy with it, because this is, like you said, just a small amount compared to the 250 billion in swipe fees that they made over the time period that this lawsuit was filed So this 725 billion is just a drop in the bucket

They've made no effort to address the policies that resulted in this enormous amount of collections In other words, it's continuing Exactly It's continuing In other words- Quit your complaining

Yeah, exactly We got 250 billion This is the cost of doing business Correct In other words, if you can make 250 billion dollars, will you pay out six billion dollars every 20 years? Basically, that's kind of the analysis

You got it Is it a good business decision? And so, here we've got something to where they paid out 62 billion dollars But they are still ripping people off on the swipe How does the swipe work? Exactly

Basically, like you said, it's the cost of doing business It's the transaction fee when a bank customer says, "Hey, I wanna use my card" That cost is passed onto the retailer So it's a transaction fee that the retailer passes onto the customer for the convenience of using that card And because so many people use those cards, retailers know that they can't necessarily quit using them all together

So they feel like they're prohibited in the options that they can give customers They want them to spend more money in their store They feel like these rising swipe fees keep those customers from spending more money with them So as a result, these banks are making just billions and billions of dollars on these fees And then, they're keeping it for themselves and passing it on as rewards, if you will, to customers and various other incentive programs within the banks

But it's basically like, "Hey, we know it's easy to use these cards We don't want you to feel like " we're basically a cashless society to a great extent now, so they know that they have these retailers over a barrel

Mollye, thank you for joining me I don't predict this is ever gonna get any better, because banks and corporations right now control the politics of American democracy almost in every- We need a trade pact We need to get back to trading Exactly