In what appears to be the continuing dramatic saga of the credit card processing industry, on Tuesday March 29, Branch MacMaster LLP and Camp Fiorante Matthews have filed a national class action suit against the credit card giants, Visa and MasterCard along with several Canadian financial institutions in the British Columbia Supreme Court. The claim alleges that the credit card companies with the banks have engaged in a multi-billion dollar price fixing conspiracies to increase or maintain the fees paid by merchants for processing credit card transactions.
The claim follows closely to the filing done by the Competition Bureau of Canada back in December which sought to disable Visa and MasterCards “accept all cards“ policy while allowing merchants to surcharge on credit card transactions. The claim alleges that both Visa and MasterCard are participating in a conspiracy to force merchants to drive up costs to consumers.
If you remember, we`ve talked about the introduction of premium cards into the Canadian market along with the changing of pricing structures for both Visa and MasterCard in several previous posts. A couple of years ago, Visa and MasterCard both changed their pricing structure to one where different cards carry different costs. So corporate cards and manually keyed in transactions are more expensive to process that those of regular credit cards. But the most damaging was the introduction of premium credit cards. These cards were to be issued to only a select group of card holders that held a high spend status and as such, cost almost twice as much to process. The justification, these card holders have a tendency to spend more and therefore are making larger purchases at the merchants locations. Only a small fraction of the credit card companies` portfolio of cardholders were to have held this status. If this were actually the case, it may have been easier to swallow for merchants. However, the reality is, when these cards were introduced, they were issued to any cardholder who requested it and even sometimes to those who didn’t. Merchants promptly saw a rise to almost 40% of their total credit card transactions being processed over a so called premium credit card. This caused the dramatic increase in the cost of processing credit card transactions.
Ward Branch, partner at Branch MacMaster LLP said “The lawsuit alleges that merchants are forced to raise prices for all customers to cover the cost of transactions with premium cards. Our research suggests that these fees cost Canadian merchants $5 billion in 2009 alone. The system is bad for Canadian merchants, Canadian consumers, and for the Canadian economy as a whole.“
Along with Visa and MasterCard, the following financial institutions were also named in the suit: BMO Financial Group, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Desjardins, National Bank of Canada, Royal Bank of Canada, Toronto Dominion Bank, Bank of America, Capital One and Citygroup Inc. as defendants.
This lawsuit is a clear indication that merchants are no longer idly standing by and allowing the credit card companies to call the shots. For more information on the class action or to read the Notice of Civil Claim, please visit www.creditcardclassaction.com. You can also provide your name as a potential merchant class member at this site as well.