WASHINGTON (6/18/14)--The National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) requested that an appeals court overturn a judge's approval of a lawsuit settlement involving credit card interchange fees from Visa and MasterCard. The two retailer organizations claim the settlement was negotiated by a select group of merchants.
An interchange fee, sometimes called a "swipe fee," occurs when a credit card transaction takes place. It goes to the financial institution that issued the card to pay for the cost of providing the card and the transaction services, including fraud protection.
U.S. District Court Judge John Gleeson ruled in December 2013 in favor of the settlement, and the appeal has been filed with the 2nd U.S. Circuit Court of Appeals in New York.
"A broad cross section of the American retail industry numbering thousands of businesses from iconic national department store chains and general merchandise chains to apparel outlets, specialty shops, restaurants and one-location Main Street stores thoughtfully analyzed the settlement and concluded that it offers them no benefit," reads a brief filed by the NRF and RILA Wednesday. "While a settlement this skewed was bound to be unpopular, the extent of dissatisfaction within the retail industry has been extraordinary."
The brief cites a number of what merchants claim are legal errors in the decision, including failure to adequately balance the monetary relief against the requirement to give up future legal claims, dismissing "substantive and thoughtful" opposition and ignoring a court-appointed expert's opinion that the proposal for surcharging was of "uncertain" value that would "have only a small impact" on interchange fees.
Opponents of the settlement claimed it "fails to reform the price-fixing system under which Visa and MasterCard set fees for credit cards," cards issues by thousands of financial institutions around the country.
The card companies proposed in the settlement that instead of lower fees, a surcharge be passed along to consumers. According to the NRF and RILA, major retailers rejected the surcharge proposal saying it was the opposite of what they had sought.
"The settlement would grant only pennies on the dollar compared with overcharges the lawsuit claimed and small retailers would see as little as a few hundred dollars each," reads a statement released Wednesday by NRF. "Retailers who reject the monetary settlement would still be bound by other restrictions the court would not allow them to opt out of, including a prohibition on future lawsuits over the fees."
The lawsuit was originally filed in 2005, and was brought by 19 retailers and trade associations. Ten of those plaintiffs, including all of the associations, rejected the settlement when it was proposed in 2012.
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