Interchange settlement gets preliminary ok

A federal district court judge granted preliminary approval to a proposed settlement, valued at $38 billion, which would close the books on a long-running legal battle between Mastercard, Visa and a class of merchants over interchange.

U.S. District Court Judge Brian Cogan said the settlement, which covers more than 12 million Visa and Mastercard merchants was "fair, reasonable and adequate," and that he would likely grant final approval, according to published reports. Cogan's ruling comes nearly two years after a different judge rejected a proposed $30 billion settlement between the card brands and merchants on the basis that it was too small.

The lawsuit was originally filed in 2005.

Visa praised the judge's decision, as did the Electronic Payments Coalition, a group representing financial institutions and payment networks. The National Retail Federation and the Merchants Payments Coalition panned the decision.

Visa described the settlement in a statement as "an important step toward potential resolution of this decades-long litigation." The statement continued, "We believe the proposed settlement would provide merchants of all sizes with meaningful relief, more flexibility, and options to control how they accept payments from their customers."

'Meaningful' relief for small merchants

The EPC, in a statement, said the proposed settlement agreement would amount to more than $200 billion in relief to merchants over eight years. "This small business credit card agreement delivers nearly a quarter trillion dollars in relief. It is a guaranteed win for Main Street and provides meaningful solutions for businesses and consumers," said EPC Executive Chairman Richard Hunt.

Terms of the agreement, which was proposed in November 2025, include:

• The ability for merchants to pick and choose which commercial, premium consumer and standard consumer cards to accept.

• A 10 basis point reduction in interchange for a period of five years.

• Interchange certainty in that current posted credit rates would be capped for five years. In addition, interchange on standard U.S. credit cards would be capped at 125 bps through the term of the agreement.

• More options for surcharging card transactions.

• A program to educate merchants on card acceptance and cost management.

Merchants balk

The National Retail Federation panned the proposed settlement. "Retailers continue to face excessive and ever-increasing swipe fees in a broken payments market that lacks competition," NRF said in a statement. "The proposed settlement offers no meaningful relief and leaves intact the underlying system that enables Visa and Mastercard to dictate the rules and costs that merchants and consumers must bear."

Doug Kantor, general counsel of the National Association of Convenience Stores and a member of the executive committee of the Merchants Payments Coalition, asserted that the "vast majority of merchants oppose this proposed settlement." He held out hope that the judge would refuse to grant final approval once he realizes its unpopularity with merchants.

In a statement, Kantor asserted that credit and debit card interchange has increased 80 percent since the pandemic, reaching a record $198.25 billion last year.

The EPC's Hunt argued that large merchants oppose the agreement to the detriment of smaller businesses.

A study by Indraneel Chakraborty, a professor at the University of Miami, found that the 100 largest retailers in the United States would save the most from the law—about $3 billion in fees, according to reporting by the website travelweekly.com.

"Unfortunately, corporate mega-stores, their lobbyists and their lawyers want to block this agreement to push untested, unworkable mandates that only further pad their profits.," Hunt said. "Corporate megastores should support this free-market, private sector agreement."

Push for CCCA

That seems unlikely, however. The MPC used the opportunity of commenting on the judge's preliminary ruling to push for the Credit Card Competition Act, which would require banks with $100 billion or more in assets to enable the cards they issue to be processed over at least two unaffiliated networks, only one of which could be controlled by Visa or Mastercard.

The MPC issued a press release detailing a consumer survey indicating the vast majority of Americans understand the high cost of using credit cards and want Congress to do something about it.

The survey of over 9,000 likely voters in the 41 most competitive House battleground districts, conducted by the polling firm Co/Efficient, found 73.6 percent of consumers know the cost of card acceptance is baked into the prices they pay for goods and services.

"In this divisive political climate, it's striking that three-quarters of American voters, including super-majorities of voters of every political persuasion, agree that Congress should stop credit card companies from picking their pockets with every swipe," Kantor said.

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