Visa & Mastercard to Pay $199.5 Million to Settle Merchant Chargeback Lawsuit

Key Takeaways

• Settlement Amount: Visa and Mastercard will pay a combined $199.5 million to settle the class action lawsuit.
• Allegations: Merchants claimed the companies coordinated chargeback rule changes that shifted fraud-related losses onto businesses.
• Liability Shift: Merchants without EMV chip-enabled terminals were made responsible for certain fraudulent transactions.
• Other Settlements: Discover and American Express previously settled related claims for a total of $32.2 million.

Deep Dive

Visa and Mastercard have agreed to pay a combined $199.5 million to resolve a long-running class action lawsuit accusing them of unfairly shifting fraud-related costs to merchants. The proposed deal, filed in the U.S. District Court for the Eastern District of New York, marks the latest in a string of settlements over card network rules and awaits approval from Chief Judge Margo Brodie, according to a recent Reuters report.

The lawsuit, which dates back to 2016, alleged that the two payment giants coordinated to change their chargeback rules in a way that left merchants footing the bill for certain fraudulent transactions. Specifically, businesses were held liable for chargebacks involving lost, stolen, or counterfeit cards if they had not upgraded their point-of-sale systems to accept EMV chip-enabled cards.

Under the proposed agreement, Visa will contribute $119.7 million and Mastercard $79.8 million. Discover and American Express, also named in earlier proceedings, previously reached separate deals totaling $32.2 million. While all four firms have denied any wrongdoing, they have opted to settle to bring an end to years of litigation.

Mastercard said it was pleased to put the dispute behind it and reiterated its commitment to advancing secure payment technologies that protect consumers and merchants alike. Visa and the plaintiffs’ counsel did not immediately comment.

Plaintiffs’ lawyers described the outcome as a “strong recovery for merchants,” noting that the settlement equates to roughly 13 percent of the maximum damages sought and exceeds half of the conservative estimates presented by the defense’s own experts.

This latest agreement comes several years after Visa and Mastercard reached a separate $5 billion settlement in 2019 over allegations that they conspired to fix interchange fees, underscoring the ongoing scrutiny surrounding card network practices and the costs borne by merchants.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.