Analysis: Card giants face £1.5bn fees claim

UK competition lawyers are poised to launch a class action lawsuit against Visa and Mastercard on behalf of travel and hospitality companies and other sectors seeking repayment of billions in card fees.

The claim for travel and hospitality alone could exceed £1.5 billion in repayment of ‘Multilateral Interchange Fees’ (MIFs) which make up most of the Merchant Service Charge (MSC) banks charge on card payments. The fees go to the banks, which pay Visa and Mastercard ‘scheme fees’, but the fees are set by the card companies as a condition of participation in the card schemes.

Specialist law firm Harcus Parker will take the case to the Competition Appeal Tribunal (CAT). Jeremy Robinson, competition litigation partner at Harcus Parker, said: “There has been a lot of litigation around these fees, most about consumers’ cards, and the EU introduced regulation which set maximum interchange fees at 0.2% for consumer debit cards and O.3% for consumer credit cards.”

However, the EU did not regulate what happens with a corporate card or a card from outside Europe – a so-called ‘inter-regional’ transaction.

Robinson noted: “Corporate card fees average 1.5%. Inter-regional fees can be 1.8%. So a business handling a lot of corporate card payments is paying £1.50 in every £100 indirectly to Visa and Mastercard.”

The card companies agreed in 2019 to reduce MIFs on inter-regional transactions by 40% but did not admit overcharging. Robinson said: “No one has followed up on that.”

He added: “While everyone has focused on consumer cards, Visa and Mastercard have doubled down on corporate cards. No one has brought a UK economy-wide case against Visa and Mastercard.”

Claimants will be represented by two companies – one for companies with £100-million-plus turnover, which need to register their interest, and the other for smaller businesses which will be represented automatically.

Travel industry non-executive director Steve Allen, former managing director of Wexas Travel and ex-chief executive of Portman Travel, is a director of both claims companies. He said: “I’ve been in travel all my working life. We all operate on thin margins. These fees are a significant chunk of profit. For me, it’s important to help the industry at a time when it has been bashed over the head by Covid.”

Robinson said: “This is funded by a third party, [legal finance experts] Bench Walk Advisors. It’s no risk, no fee. The claim is for all sectors of the economy. But for travel and hospitality alone it will be worth £1.5 billion.”

The claim will mark the latest in a series against Visa and Mastercard, stemming from a 2007 EC ruling, upheld by the European Court of Justice, that interchange fees on card payments breached competition law.

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