Class Action Settlement – Where Are We?
I have been getting lots of inquiries about the status of the class action settlement against Visa and MasterCard. My clients are asking me what they should tell their merchants many of which seem to think the check is already in the mail but the settlement is anything but a done deal. Below I will update the status of the case, provide information about what merchants can expect to be paid if the case is finally resolved and information about the claims procedure.
There has been a proposed settlement reached in the case. But the settlement has not yet been given final approval by the court. There is a fairness hearing set for September 12, 2013 at the federal courthouse in Brooklyn, New York. At that hearing, the court will determine if the proposed settlement is “fair, adequate and reasonable.”
But it is far from clear if the settlement will be approved in its current form. When the settlement was announced, there was a large group of the named plaintiffs in the case that objected to the settlement. In addition, hundreds of merchants that would be part of the settlement also objected to the proposed settlement. These objections are ongoing and will be heard by the court as part of the process of determining whether or not to approve the settlement. If the court sides with these merchants, the settlement conceivably would have to go back to the drawing board for revisions.
The Settlement Funds:
As currently proposed, the settlement has 2 funds that will be used to pay the merchants if the settlement is approved. The first fund is the Cash Settlement Fund in the amount of approximately $6.05 billion. The amount merchants can obtain from this fund is based on the merchants’ interchanges fees charged on Visa and MasterCard transactions from January 1, 2004 to November 28, 2012.
A class administrator will be responsible for determining the amount of interchange paid by each claimant. Visa, MasterCard and other defendants are making available information to the claims administrator in order to allow it to try and determine how much interchange was paid by each claimant. The claims are to be based on the “best available information or a reasonable estimate of the total amount of interchange fees” for each claimant.
The amount of the settlement funds from the cash fund that each claimant receives is dependent upon the total amount of claims made. Each claimant is entitled to its pro rata portion in an amount equal to the interchange paid by the claimant as it relates to the total amount of claims made. No estimate of what that will amount to is provided in the documents I reviewed on the official website.
There is a second fund called the interchange fund that is approximately $1.2 billion. This fund will pay claimants 10 basis points multiplied by the claimants transaction volume of MasterCard and Visa credit cards made from the period starting by July 29, 2013 and going on for 8 months thereafter. So for each $100,000 in sales processed on Visa and MasterCard credit cards claimants can expect to get $100 from the interchange fund.
Making A Claim:
Merchants must make a claim in order to be able to get any of the proceeds from the settlement. If a merchant does not make a claim it will get none of the settlement proceeds and also be barred from suing on the claims settled in the lawsuit. Many merchants have already been sent the notice of class action settlement and those merchants are already in the data base that will be used to send out claim forms.
Other merchants that did not get such forms can now go the official settlement website and pre-register in order to get a claim form mailed to them by the claims administrator. If your merchants did not get a notice, they should go to the website as soon as possible to pre-register.
Assuming the settlement gets final approval, a claim form will then be developed. If there is available information, the claims administrator will then calculate the amount of interchange that it is estimated was paid by a merchant, place that information on the claim form and send it to the merchant. If there is no information available, some merchants may have to provide the claims administrator with proof of their sales and/or interchange paid for the relevant time period.
Merchants should be preserving sales information and begin compiling it in order to be able to see if they agree with the calculations made by the claims administrator. Claimants will be able to contest the accuracy of the amount calculated by the claims administrator by checking a box on the claims form, providing the amount of interchange the merchant believes is accurate and sending it all back with supporting documentation to the claims administrator. This most certainly will be a large job so merchants shouldn’t to wait until they get the claim form to gather this information since they only have 30 days to get their response back to the claims administrator once they get the form.
The court has ordered an official website located at www.paymentcardsettlement.com which provides extensive information about the lawsuit and the procedures to make a claim. Merchants should review the site and keep updated on information about the claims procedures and claims deadlines in order to get their slice of the settlement pie.
The information contained herein is for informational purposes only and should not be relied upon in reaching a conclusion in a particular area. The legal principles discussed herein were accurate at the time this article was authored but are subject to change. Please consult an attorney before making a decision using only the information provided in this article.