The proposed $7.25 billion settlement of the class-action lawsuit brought by retailers against Visa Inc. and MasterCard Worldwide over alleged excessive interchange fees figures to be an exceptional opportunity, since it means money in the merchants' pockets. In March 2013, the lawsuit's class of plaintiffs - approximately 7 to 8 million card-accepting merchants and other organizations in the United States - were mailed a notice that outlined what they must do to opt in (or out) of the proposed Visa Mastercard settlement. Who would blame business owners and these merchants from glancing at the arduous document, throwing it into a paperwork pile and promptly forgetting about it? However, forgetting about it could result in small to midsize merchants missing out on thousands of dollars in settlement funds.
The proposed settlement, which was granted preliminary approval in November 2012 by a New York district court judge, is divided into two parts. The first is the $6.05 billion Cash Settlement Fund. The second is the Interchange Fund, which is estimated to hold approximately $1.2 billion.
Money from the first fund will be distributed once (and if) the settlement is approved by the New York court in a hearing scheduled for Sept. 12, 2013. Merchants will receive their portions from the first fund based on the volume of Visa- and MasterCard-branded card payments they transacted between Jan. 1, 2004, and Nov. 28, 2012.
In exchange for the settlement and release of Defendants, members of the Cash Settlement Class who submit a valid claim will receive payment from a settlement fund, comprised of a maximum cash payment of $6.05 billion and a payment based on a reduction in interchange fees during an eight-month “Interchange Period,” which has an estimated value of $1.2 billion.
Money from the second fund will be distributed only after an eight-month period has elapsed, with that period starting no later than July 29, 2013. The amount from the second fund that each merchant will receive is calculated based on transaction volume during that eight-month period.
Merchants are estimated to receive from the first fund anywhere from $400 to $600, based on every $100,000 in card payments over the nine-year period set forth in the settlement.
Therefore, even a small mom-and-pop shop that did only $100,000 in card transactions per year could expect to see a check from $3,600 to $5,400. That money could be used by merchants to grow businesses or stay in business.
As for the second fund, refunds will be calculated based on 10 basis points (one-tenth of 1 percent) of card transaction volume over the designated eight-month period; so for each $10,000 in card transactions processed, claimants can expect to see $10. That money can add up quickly based on merchant size.
Merchants must take action to take part in the settlement. If they don't file the required paperwork with the claims administrator, they forfeit their right to settlement funds. Additionally, failure to file also results in merchants losing the right to sue the card brands for "past conduct," the notice said.
If merchants object to the proposed settlement and don't want to take part, it's not enough to lodge a silent protest. They must opt out of the settlement by filing the proper paperwork, or they also waive their right to sue the card brands over past issues.
If merchants want to file objections to the proposed settlement, they must also do so by May 28, 2013. The deadline for the actual filing of a claim, pending approval of the settlement, will be set after the Sept. 12 hearing.