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This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.
Visa, MasterCard and some of the biggest banks in the U.S. have agreed to a historic settlement of more than $6 billion in a class action lawsuit brought on behalf of more than 7 million merchants. NPR's Steve Henn has been reviewing this settlement agreement. He joins me now. And, Steve, what's this case about?
STEVE HENN, BYLINE: Well, the case centers around swipe fees. Every time you pull out your credit card or debit card to pay for gas or a cup of coffee, credit card companies like Visa and MasterCard charge the merchant a fee. The industry averages about 2 percent of the transaction. So that's why for years, gas stations and other places have sometimes offered discounts if you paid with cash. But back in 2005, attorneys representing merchants and small businesses that accept cards brought a class action lawsuit, alleging that Visa and MasterCard were colluding to fix these swipe fees.
They accuse the card companies and some big banks, including Bank of America, Citibank and Wells Fargo, of working together to create anti-competitive rules that kept the fees artificially high. The case was set to go to court this September in Brooklyn, but this afternoon, the banks and the card companies decided to settle.
BLOCK: And they settled as we said, for $6 billion. This is big money at stake here.
HENN: It is. It's a ton of money. Americans are addicted to plastic. We use our credit cards to make trillions of dollars in purchases each year. Card companies collectively earn between 40 and $50 billion in swipe fees. This settlement requires the big banks not only to pay $6 billion in damages, but also to reduce their swipe fees going forward. Lawyers for the plaintiffs estimate that will save businesses something like $1.2 billion. The card companies have also agreed to new rules that will make it possible for groups of businesses to band together and negotiate lower fees together. And these rules also might make it easier for consumers to actually see and understand what they're being charged by card companies when they're at the checkout counter.
BLOCK: And other effects for consumers, Steve?
HENN: Well, you know, according to the National Retail Federation, the amount of money credit card companies have been charging on swipe fees has been escalating. Retailers say that most small businesses that accept cards operate on thin margins. So these fees are really passed along directly to us shoppers. And the Retail Federation estimates that the average American household spends close to $400 a year on these fees, and that's up from just over 150 in 2001. So, you know, if this has a long-term effect of pushing swipe fees down, it could save all of us money.
BLOCK: OK. NPR's Steve Henn. Thank you so much.
HENN: My pleasure. Transcript provided by NPR, Copyright National Public Radio.