Payment Card Interchange Fee and Merchant Discount Antitrust Litigation

In 2005, various groups of merchants filed a number of class action lawsuits against Visa, MasterCard and various financial institutions which issue payment cards carrying the Visa or MasterCard marks. The class groups of plaintiffs claimed that Visa, MasterCard and the named financial institutions unlawfully set the fees charged to merchants for U.S. credit card transactions over the Visa and MasterCard networks. They also claimed that the rules enacted by the card networks prevented them from adequately protecting themselves against those fees. All of these lawsuits were consolidated in federal court in New York for more efficient management and resolution. It’s important to note that Allegiance Merchant Services, Elavon and its affiliated entities are not defendants in any of these pending class action lawsuits or the proposed settlement of these cases.

Card Brand Settlement

In an effort to bring closure to these disputes and avoid the costs and expenses of further litigation, the parties involved in these cases have formulated a proposed settlement, which addresses this lawsuit and other outstanding litigation. This proposed settlement has been granted preliminary approval as of November 9, 2012. All U.S. merchants (including the District of Columbia, Puerto Rico, and all U.S. Territories) who have accepted a Visa or MasterCard payment card at any time since 2004 are members of the class. The terms of the settlement include the creation of a settlement fund with an estimated $7.25 billion dollars, of which $6.05 billion will be in cash. It also includes changes to acceptance practices that were alleged by merchants to restrict competition, as well as temporary interchange reductions that have an estimated value of $1.2 billion.

Surcharging

As a result of this litigation, Visa and MasterCard recently announced that they have formally made changes to their acceptance practices related to surcharging. Effective January 27, 2013, merchants are able to surcharge a customer’s credit card transaction (not debit or pre-paid) where permitted by local and state laws. Merchants must register with Visa, MasterCard and their acquirer 30 days prior to implementation of surcharging. While the card associations are set to accept merchant registrations, like other acquirers, Elavon is working to make the significant system changes required to support the new technical rules associated with surcharging. In the meantime, merchants who intend to surcharge may continue to notify/register as required by the changes in the acceptance practices. Future updates will be provided as significant changes related to the settlement details occur.

Merchant Claim Purchase or Assignment

Allegiance Merchant Services and Elavon is aware that merchants may be approached or notified by various businesses offering to immediately purchase or seek assignment of the merchant’s claim against the proposed settlement fund. Merchants are encouraged to consult with their own financial, accounting, or legal advisors regarding their decision to sell or assign any potential claim against the proposed settlement fund instead of waiting for the court administered claims process and the accompanying payments resulting from same.

States that Currently Prohibit Surcharging

California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas all have legislations that prohibit surcharging regardless of the changes made as part of the settlement.

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