CREDIT CARD COMPANIES BOMBARDED AGAIN WITH LAWSUITS

By Art Lieberman We have been reporting to our industry that credit card companies have been embattled for several years in class-action suits claiming that the companies have conspired to set prices on credit card rates in violation of antitrust laws. The suit, we noted recently, although thought to be settled, was overturned by the U.S. Court of Appeals and is, once again, still pending. But now, retailers are after the card companies for that horrendous roll-out of the chip card and the required EMV terminals that retailers need to process chip cards. The suits center on the “arbitrary” October 1, 2015, deadline that the companies set to complete the conversion to chip card technology. A suit, initially brought in Federal District Court by two small Florida businesses – B & R Supermarket and Grove Liquors – in March, has now been joined by Los Angeles gourmet food chain Monsieur Marcel and Fine Fare, a New York City food chain. U.S. District Court Judge William Alsup of the Northern District Court of Southern California has allowed the case to move forward against Visa, MasterCard, Discover Financial Services, and American Express. The suit alleges that there was a conspiracy by the card companies to create an artificial deadline to shift responsibility for fraudulent transactions to retailers who haven’t upgraded from the old magnetic strip reader to the newer chip card reader. Lawyers for the plaintiffs have said that a class action suit may well involve as many as 8 million retailers, mostly small businesses. The action seeks to recover costs of the upgrade to the new equipment and/or software which is estimated at $6 billion. But others estimate damages could be as much as $40 billion. The judge’s decision to proceed with the action against the credit card companies relies on the fact that the rollout of the chip card deviates from the rollout in Europe. The judge concluded that . . . “the deviation from prior rollouts points the finger at plausible suspicion and tends to show the lock-step rollout in the U.S. flowed from a conspiracy . . . .” Judge Alsup continued by explaining that in Europe the networks “offered certain accommodations to other countries by reducing interchange fees, implementing gradual rollouts, and providing additional time to install terminals.” Visa CEO Charlie Sharf told analysts that Visa had actually informed retailers, banks, and other credit card companies of the conversion in 2014. But the judge said that just because merchants were present on that occasion didn’t actually render the idea of a conspiracy implausible. Judge Alsup pointed out that “run-of-the-mill merchants like the plaintiffs did not take part in those discussions.” After the lawsuit was filed the credit card companies tried to make the transactions faster and have forgiven chargebacks of less than $25 as a result of the lack of pin non-compliance. Meanwhile, ironically, Walmart and Home Depot have brought a separate action against the credit card companies related to the contention that the new chip card transactions rely on “chip and signature’” rather than the more secure “chip and pin” for which they were designed. And the beat goes on… MCPS is a credit card processor sponsored by Woodforest Bank NA. Company President Art Lieberman has been in the industry for over 18 years and has been conducting free webinars online and seminars on credit cards in many State and Regional Association Conventions. He can be contacted at 877-858-9010 or at rvcreditcards@yahoo.com.)