Major Banks Targeted in $54B ‘Interchange Fee’ Class Action Lawsuit

A proposed class action lawsuit has accused JPMorgan Chase & Co., Bank of America Corp., Capital One FSB and HSBC Bank USA NA of conspiring to fix “interchange fees,” resulting in consumers being subjected to billions of dollars in illegal charges.

Melvin Salveson, Edward Lawrence, Dianna Lawrence and Wendy M. Adams filed the class action lawsuit on Monday, seeking to represent a nationwide class of Visa and MasterCard holders. They allege that the banks conspired with the credit card companies to fix the card swipe fees, causing cardholders to be subjected to more than $54 billion in illegal fees each year. The plaintiffs accuse the banks of violating the Sherman Act and the California Business and Professions Code.

The plaintiffs argue that more than $54 billion would have been available for consumers to spend if not for the alleged price-fixing conspiracy. “This price-fixing conspiracy is ongoing and additional overcharge dollars are being extracted from Cardholders pursuant to the conspiracy every time they swipe their Visa and MasterCard payment cards,” the class action lawsuit says.

According to the class action lawsuit, the plaintiffs each purchased “thousands of dollars’ worth of goods and services and paid related Interchange Fees on Visa and MasterCard transactions at prices inflated by the Defendants’ price-fixing conspiracy over many years.” Because of these fees, they argue, they have purchased products at artificially inflated prices.

The Visa and MasterCard networks evolved from local and regional credit card systems that were originally developed in the 1960s. The class action lawsuit alleges that the defendants have entered into illegal written membership agreements and perpetual license agreements with Visa and MasterCard, requiring them to implement standard interchange fees with the promise of decreased competition and increased profits.

“In furtherance of the conspiracy, Defendants and their co-conspirators also agreed to and have collectively imposed restraints on competition, such as so-called ‘Exclusionary Rules,’ ‘No Discount Rules,’ ‘No Surcharge Rules,’ and ‘Honor All Cards Rules,’ as well as Anti-Steering and other restrictions imposed upon merchants to the detriment of Cardholders,” the plaintiffs argue in their class action lawsuit. These rules effectively prohibited merchants from informing consumers about the true costs associated with different forms of payments and from offering consumers an option to use a credit card with lower fees.

“Through their common control of both Visa and MasterCard, Defendants and their co-conspirators have stifled competition between Visa and MasterCard and have thwarted competition from smaller competitor networks such as American Express and Discover,” the class action lawsuit says. “This reduction in competition among general purpose payment card networks has resulted in higher Interchange Fees, hindered and delayed the development and implementation of improved network products and services, and has lessened consumer choice.”

By filing the class action lawsuit, the plaintiffs are seeking injunctive relief, monetary damages and attorneys’ fees.

This class action lawsuit was filed just days after an historic $7.25 billion antitrust settlement related to Visa Inc. and MasterCard Inc.’s alleged conspiracy to fix credit card swipe fees.

The plaintiffs are represented by Joseph M. Alioto, Theresa D. Moore and Jamie Miller of the Alioto Law Firm and Lingel H. Winter of the Law Offices of Lingel H. Winters.

The Credit Card ‘Interchange Fee’ Class Action Lawsuit is Salveson, et al. v. JPMorgan Chase & Co., et al., Case No. 13-cv-05816, in the U.S. District Court for the Northern District of California.