Visa Ordered to Repeal Settlement Service Fee against Debit Issuers

In United States v. Visa U.S.A., Inc., ET Al., the U.S. District Court for the Southern District of New York entered an order requiring Visa to repeal their Settlement Service Fee (“SSF”). The SSF, implemented under By-Law 3.14, required Visa’s top 100 debit issuers to pay a fee if they moved their debit portfolio from Visa to Mastercard.

The SSF required the debit issuer to pay their proportionate share of Visa’s $2 billion class action lawsuit settlement to Wal-Mart and other retailers (Class Action Information). For example, if the debit issuer accounted for 4% of Visa’s debit volume, that issuer would be assessed a fee of 4% of the outstanding settlement balance when it switched to Mastercard. This fee, which could be very substantial, required Mastercard to offer indemnification to some issuing banks that did switch and, according to the court, prevented banks from switching to Mastercard.  This case will make it easier for banks to switch providers, potentially creating more competition among debit providers. 

For more information contact Bill Daly at bdaly@dickinsonlaw.com or Howard O. Hagen.