Visa Debit Card Fees Ruled Unlawful
A big loss for Visa… and a big win for Mastercard
A ruling handed down by Judge Barbara S. Jones of Federal District Court in Manhattan makes a service fee that Visa places on its largest debit card users unlawful and must be repealed. The service fee required Visa’s 100 largest issuers of debit cards to pay a “settlement service fee” if they reduced their Visa debit volume by more than 10 percent which effectively prevented them from switching their business to their rival, MasterCard. The judge also ruled that Visa’s top 100 debit card issuers could end their agreement with Visa even if they were signed up when the fee was being charged and decided they wanted to switch.
“This is a significant win for MasterCard and its customers,” said Noah J. Hanft, MasterCard’s general counsel. “With this roadblock out of the way, financial institutions will not be deterred by this coercive fee and can make decisions based on their best judgment about quality of service, strength of brand and other competitive factors that benefit their cardholders.”
Visa’s response to the ruling indicated that they were weighing their legal options which could include an appeal. “Since Visa enacted the settlement service fee, competition for debit card issuance has remained vibrant,” the company said in a statement. “Debit wins by MasterCard demonstrate that Visa’s settlement service fee has not prevented members from issuing MasterCard debit cards. We are confident our issuers are committed to Visa’s debit products due to the strong value they offer, not the settlement service fee.”
