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ATM industry files brief against interchange settlement
SIOUX FALLS, S.D. and NEW YORK (11/8/12)--The ATM Industry Association (ATMIA) announced Friday that it has filed an amicus ("friend of the court") brief in the U.S. District Court of Eastern New York, in conjunction with other opponents of the proposed class-action settlement between merchants and MasterCard/VISA. Although credit unions were not part of the litigation, they would be affected by temporary reduction in credit card interchange, surcharging and buying groups.

ATMIA contends that the language of the agreement is so broad and vague that it might be construed to include ATM deployers, even though the original claims were made by merchants engaged in the sale of goods or services.

The proposed settlement would presumably end many years of disputes between merchants and the two card brands over interchange fees and surcharging. Merchants would finally gain the right to impose surcharges on credit card purchases, as well as share in about $7.3 billion in payments and temporary interchange reductions as damages. MasterCard and VISA, in turn, receive a broad release of all related claims-both current and future.

ATMIA asserts that the proposed agreement is flawed as written. Most "ATM cards" have been replaced by debit cards, which can be used either for ATM transactions or purchases at the point of sale. MasterCard and VISA debit cards represent the vast majority of that market. As a result, the settlement class definition captures a majority of the cards used for ATM transactions and, thus, the deployers of those ATMs.

However, even if the ATM deployers were drawn into the settlement class, they would not be eligible to receive an award of damages, because an ATM deposit/withdrawal transaction is not a purchase, ATMIA said. Therefore, an ATM deployer could involuntarily become a party to this class action settlement, and at the same time, be barred from receiving any benefit.

ATMIA is requesting that the proposed settlement not receive preliminary approval from the court. Or, that the agreement language be revised to make clear that ATM deployers and operators are not included within the scope of this settlement.

ATMIA is a global non-profit trade association with over 3,700 members in 60 countries.  

The judge overseeing the $7.25 billion settlement in retailers' class antitrust lawsuit against Visa and MasterCard over credit card interchange fees said that opponents to the proposed settlement can plead their case in a hearing set for Friday [Nov. 9] (News Now Oct. 26).

"I have reviewed the settlement agreement and at first blush it appears to satisfy the threshold requirements for preliminary approval," said U.S. District Judge John Gleeson of the U.S. District Court for the Eastern District of New York in the order Oct. 31. He added he would hear their arguments against a preliminary approval Friday. "As in every case, those objections deserve, and will get, careful consideration by the court."

Credit unions were not a party to the litigation, but will be impacted by the injunctive relief settlement terms--temporary reduction in credit card interchange, surcharging and buying groups. The settlement's proposed reduced credit card interchange rate fees could cost credit unions with credit card programs up to $50 million total, said the Credit Union National Association (CUNA).

The settlement would require a reduced interchange rate fee (IRF) of 10 basis points for an eight-month period, likely beginning in mid-2013, and would apply to all card issuers, including credit unions.

If the total credit IRF reduction is $1.2 billion, credit unions with credit card programs would lose about $50 million in total revenues, or about 0.5 basis points on their total assets, CUNA said. The loss would be concentrated among a relatively small number of credit unions with very active credit card programs.

The proposed settlement also calls for Visa, MasterCard and the banks to create a $6.05 billion fund to repay retailers for past fees charged and says retailers would be permitted to assess "check out" fees or surcharges on credit card purchases, which has previously been prohibited by Visa and Mastercard rules.


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