Written by: Olivia S. Murphy
On May 26th, just a few short months after their last settlement, credit card giants Visa and MasterCard agreed to pay $197 million to settle a class action by consumers. The issue at hand involves ATM fees, which many readers have paid – that little two to three dollar surcharge that is collected by the bank that owns the ATM being used. Withdraw cash at your own bank to save yourself the fee, but not all banks have a multitude of locations. Local banks and credit unions may be inaccessible in some areas, leaving consumers with a need to withdraw cash from an unfamiliar bank’s ATM. And there, fee beware.
Visa and Mastercard have been accused by the plaintiff class of keeping cash access fees “artificially high.” This means an unnecessary inflation of the price, done to collect more fees for the bank owning the ATM, and for the credit card companies that obtain processing fees on transactions completed at an ATM. Like any business, banks and credit companies have costs that need to be paid (think employee salaries and manufacturing or marketing costs), but a finding of liability at trial in a case like this would mean that the defendants had unnecessarily inflated the price of ATM fees beyond what was reasonable to cover their business costs and turn a profit. By settling with the plaintiffs well before a trial, Visa and Mastercard have eliminated a finding of that nature, opting instead to resolve the issue with the plaintiffs.
Many proposed class actions die before ever reaching a settlement, in large part due to the fact that they are not certified. A class must be certified by the presiding judge in order to continue as a class action, which can include millions of unnamed plaintiff members and is far more intimidating to defendants than a multitude of small, individual civil actions. Even more certified class actions settle before ever going to trial.
Class action litigation is a different beast than individual litigation. In individual civil litigation, a settlement is paid to the plaintiff, who pays their lawyer. In class action litigation, there can be millions of plaintiff class members, but they don’t all have lawyers. In fact, a class is represented by just a handful of lawyers who must act in their best interests (i.e., secure the largest settlement and ensure that future class members, those who are unaware that they have been affected, have shares of that settlement). Along with the lawyers advocating for the class, a class action settlement is paid to these class members – those who fit into the group of people who were affected by the defendant’s action/inaction, or negligence. In class action litigation, a class must be defined, often by the period of time that they purchased or used a defendant’s product, visited a defendant’s facilities, or interacted with a defendant. Here, the class of consumers alleged to be affected by artificially-high ATM fees is as large as 175 million people.
Lurking in the background for Visa and Mastercard is the memory of their current stance as defendants in another $5.5 billion settlement in Brooklyn, for allegedly overcharging merchants on card transaction fees at points of sale. This might have prompted the giants to settle the case early, both wary of the possibility of a higher future settlement. The $197 million settlement has been reached by the parties in federal court in Washington, D.C., and is subject to court approval. Of that, Visa will pay $104.6 million and Mastercard will pay $92.8 million. The bank defendants, those owning the ATMs, settled their claims earlier for $66 million.
The differences between individual litigation and class action litigation rears their head
again here: individual litigation does not need court approval of a settlement. However, because
of the large number of people affected by the defendants in class action litigation, a judge must
determine the adequacy of the settlement in a class action case. The judge takes on the role of
protecting the class members, as much as the plaintiff attorneys do.
Despite agreeing to a settlement, Visa and Mastercard have denied any wrongdoing. It
remains to be seen whether the plaintiff class will be paid any of the $197 million or the $66
million, or whether the credit companies and banks intend to repay their consumers by passing savings down the seemingly-endless chain of bank and processing fees.
Sources:
Jonathan Stempel, Visa, Mastercard reach $30 billion settlement over credit card fees,
Reuters (Mar. 27, 2024, 6:13 AM).
Lyle Moran, Merchants urged to file claims for $5.5B payment credit card settlement,
Payments Dive (May 6, 2024).
Mike Scarcella, Visa, Mastercard to pay $197 million to settle consumer ATM fee lawsuit, Reuters (May 29, 2024, 4:41 PM).