Retail News Breaks Archives
NCPA rejects credit card fee settlement
August 2nd, 2012
ALEXANDRIA, Va. – The board of directors of the National Community Pharmacists Association has voted against a proposed settlement of a lawsuit brought by retailers and trade groups against Visa, MasterCard and banks over credit-card swipe fees.
NCPA said Wednesday that the settlement for the suit — which claims Visa, MasterCard, Bank of America, Citibank, Bank One, J.P. Morgan Chase, Wells Fargo, Capital One, SunTrust and other banks colluded in setting credit-card interchange fees at exorbitant levels — doesn't achieve the changes needed to fix "a badly broken system."
"After closely reviewing this complex and multifaceted proposed agreement along with legal counsel, NCPA's board concluded that the settlement is insufficient and that accepting it would not be in the best interest of merchants and the independent community pharmacy owners that NCPA represents," NCPA chief executive officer B. Douglas Hoey said in a statement.
"NCPA joined this lawsuit to achieve meaningful, long-term reforms to the current swipe fee system. This proposed settlement came woefully short by not imposing necessary fundamental changes to the structure of the industry and the rules affecting merchants, particularly small-business community pharmacies," he noted.
Under the settlement reached last month in federal court in Brooklyn, Visa, MasterCard and more than a dozen of the nation's largest banks agreed to pay $6.05 billion to about 7 million retailers. The deal also allows retailers to impose surcharges on customer purchases made with credit or debit cards, and the companies agreed to reduce swipe fees by the equivalent of 10 basis points for eight months. The reduction stands to cost the banks an additional $1.2 billion.
"Several specific provisions illustrate how the proposed settlement falls short," Hoey explained. "First, while the settlement appears to offer merchants the ability to pass along some excessive credit card fees to their customers in order to incentivize consumers to use alternative, lower-cost methods of payment, enough strings are attached and existing barriers exist to effectively eliminate this as an option. Second, despite the fact that this proposal does little to reform a badly broken system, the settlement broadly curtails pharmacies and other merchants from taking any future action against the credit card companies by releasing any and all claims going forward.
"Finally," he added, "nothing in this agreement restrains the credit card companies from imposing significantly higher fees for years to come, effectively wiping out the monetary component of the settlement."
A federal judge still must approve the settlement. However, a rising number of merchants and trade associations are calling on retailers to reject the $7.25 billion settlement.
"The proposed settlement would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees, which already cost consumers tens of billions of dollars each year," a Walmart spokeswoman said in a statement.
Target Corp. indicated that it would be unlikely to add a surcharge for customers if the law allows it. "Target has no interest in surcharging guests who use credit or debit cards in order to allow Visa and MasterCard to continue charging unfair fees," the company said in a statement.
According to the National Retail Federation, the settlement creates so many hurdles to a surcharge that as a practical matter most retailers wouldn't do it, and laws in 10 states — including Texas, California and New York — prohibit surcharges for noncash payments.