Three of the major credit card lenders in the United States are facing a civil lawsuit filed against them by the Justice Department of the United States for levying anti-competitive rules on merchants, by subjecting them to high fees when customers use credit cards to pay for their purchases. In addition to this, the merchants are also forbidden from telling the customers the truth about using credit cards for purchases, the rewards associated with them and the extra charges they would ultimately have to pay.
The Department of Justice also announced that they have reached a settlement with Mastercard and Visa and are just awaiting the court approval on that. However, American Express has failed to sign on the settlement reached which implies that it is currently the only bank that continues to face the civil lawsuit. This is also the bank that has the highest "swipe fees" associated with their cards.
As per the terms of the new settlement reached between the Department of Justice and the financial majors, Visa and Mastercard, merchants will now be allowed to disclose the truth behind using credit cards for purchases to customers and also give them an option to pay through credit cards that charge lesser fees. Also, merchants will have the liberty of offering incentives to consumers who opt for to pay for their purchases with cash or cards that charge minimal fees.
Eric Holder, an Attorney General in the United States, clearly announced that the settlement reached today is a clear indication that the people in the United States will not tolerate practices that are not competitive. He says that the Department of Justice is focused on eliminating all the anti-competitive rules that are proving to be costly not only for merchants, but also for consumers. He also said that the department aims to establish a fair credit market for consumers so no one feels cheated in the process of making money.
According to the Department of Justice of the United States, banks that issue credit cards to consumers make over $35 billion in profits just through the "swipe fees" associated on the cards. These costs that have to be borne by the merchant is ultimately transferred to the consumer who ends up paying more than needed for various products and services.
Financial bigwigs such and Visa, MasterCard and American Express prevented merchants from divulging these internal details to consumers, thereby causing them to increase the retail charges, thus making the customer pay more.