dcsimg

Visa, MasterCard antitrust case could squeeze rewards cards

By , CardRatings contributor
  • Google +
  • Twitter
  • Facebook
visa-mastercard-antitrust-case-could-squeeze-rewards-cards

The Street's Dan Freed warned investors this month that a major lawsuit against Visa, MasterCard, and over a dozen large credit card issuers has slipped "under the radar" despite the significant changes it could bring to the payment marketplace.

Although the case won't reach the courtroom until September, industry analysts have started making guesses about its outcome after learning the identity of the judge assigned to the suit. Judge John Gleeson handed down a $3-billion judgment against the credit card industry in 1996, ruling in a lawsuit brought by a coalition of mall specialty stores and big box retailers.

This time, however, the banking industry faces the ire of over five million small businesses that have opted in to this year's class action lawsuit. The plaintiffs charge that a competitive payment processing marketplace would charge much lower fees without the alleged collusion of Visa, MasterCard, and major banks.

Analyst predicts four times the impact of debit card fee cuts

Attorneys representing the merchants allege that the banking networks spun Visa and MasterCard into standalone companies to avoid the appearance of a monopoly. Freed found some Wall Street analysts expecting Gleeson to reach a similar conclusion, which may spur the payment processors to settle the case outside of court.

One Deutsche Bank report suggests that a settlement bringing United States transaction fees in line with those charged in other parts of the world would cause a drop in bank revenues four times as large as the dip banks experienced after the passage of the Durbin Amendment. Shortly after that law's passage, some banks stripped rewards points from debit cards, while adjusting fee structures for checking accounts and other retail banking products.

American Express escaped the scope of this lawsuit because it operates its own independent payment processing network with interchange fees that often cost retailers more than when they process Visa or MasterCard transactions. Though the company faces a few related lawsuits of its own, CEO Ken Chenault has previously gone on record defending his company's rates as reflecting the added costs of premium customer service, fraud detection, and purchase protection programs.

0 Responses to "Visa, MasterCard antitrust case could squeeze rewards cards"

No Comments

Leave a Comment
 
 
 
About Our Ratings ×

Our editors rate credit cards objectively based on the features the credit card offers consumers, the fees and interest rates, and how a credit card compares with other cards in its category. Ratings vary by category, and the same card may receive a certain number of stars in one category and a higher or lower number in another.

The ratings are the expert opinion of our editors, and not influenced by any remuneration this site may receive from card issuers.

Advertisers in our database are highlighted, and advertisements include an option to apply using links on our site. CardRatings.com may be compensated by companies mentioned on the site when a user's application is accepted or approved by such companies.

How do your cards stack up?

Compare your card starting here

NEXT »

Featured Partner Cards

loading