Visa Adding $700M to Legal Account

Visa (V Quote) plans to add $700 million into an ongoing escrow account for litigation expenses through the repurchase of common stock.

More than 16,000 financial institutions that hold Class B shares of Visa's stock, formerly the company's member banks, will "bear a corresponding financial impact via a reduction in their converted share count" as a result of funding the escrow account, according to the release. This has the effect of a repurchase by the company of $700 million of Class A Common Stock on an as converted basis, it said in a release.

Visa, which went public in March 2008, operates the world's largest electronic payments network. The company, like rival MasterCard (MA Quote), makes its money on transaction fees and does not hold customers' credit card debt on its balance sheet.

Prior to a restructuring completed last year, Visa was organized as multiple associations by country. So-called member banks owned shares in the various associations. It now operates under one holding company, with the exception of Visa Europe.

But because of its wide swath, Visa is involved in several legal and regulatory proceedings. As of March 31, Visa had approximately $2.1 billion set aside in its litigation escrow account.

Visa, along with MasterCard, had previously settled ongoing lawsuits with American Express (AXP Quote) and Discover Financial Services (DFS Quote). The two credit card companies had alleged that Visa and MasterCard had conspired to keep them from entering the bank-issued credit card space.

Separately, Visa is also involved in a host of class action and individual complaints filed since 2005 on behalf of merchants against Visa, regarding overcharges on so-called interchange fees. The suits allege Visa, MasterCard and member banks were involved in setting default interchange rates, which violated federal and state antitrust laws.