|Legal rulings have dramatically affected the credit card industry, which pass on pain to the consumer.|
- Interchange fees remain a battleground between banks and retailers. Last year, regulations lowered the interchange fee that retailers had to pay banks for debit card transactions. But the rules did not address the interchange fee for credit cards, and retailers have turned to the courts to litigate their way to lower interchange payments for credit cards. Retailers want to add a fee when a customer pays with a credit card, but Visa (V) and MasterCard (MA) prohibit this. A possible settlement may allow merchants to add a surcharge on credit card transactions, helping retailers cover the cost of accepting credit cards by passing the fee to consumers and raising the cost of the purchase. Merchants have filed more than 50 lawsuits since 2005 to argue that Visa, MasterCard and several banks, including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), Capital One (COF) and Citigroup (C), have collaborated to fix the fees that merchants pay to accept cards -- a violation of antitrust laws.
- Discover (DFS) is facing regulatory action by the Federal Deposit Insurance Corp. and Consumer Financial Protection Bureau over its marketing of fee-based products such as payment protection and other add-on services. Discover estimates that possible losses could exceed $100 million. According to the Journal, the company has been accused in lawsuits of misleading marketing tactics to get consumers to sign up for services.
- In January, the Supreme Court ruled that consumers who sign a credit card agreement that features an arbitration clause do not have the option to dispute any charges or fees in the courtroom. This applies to almost every person who has a credit card, since nearly all credit cards have an arbitration clause tucked into the fine print. The clause may restrict consumers from joining class-action lawsuits against a company.
- In November, a federal judge in Miami gave final approval for a $410 million settlement in a class-action lawsuit over Bank of America's overdraft fee. The settlement was divided among the more than 13 million Bank of America customers who had an overdraft during the past decade. These customers claimed the bank processed debit card transactions in the order of highest to lowest dollar amount so Bank of America could maximize the overdraft fees customers were charged.
- Also in November, the court gave final approval of a Currency Conversion Fee Antitrust settlement over how the credit card companies charged fees when purchases were made outside the United States. Nearly $276 million was distributed to 10 million consumers to compensate them for the setting and disclosure of foreign currency conversion fees. (Lawyers got more than $51 million.) Some of the defendants in the case were Bank of America, Chase, Citibank, MBNA, Visa and MasterCard.