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Tuesday, July 19, 2016

UK joins global backlash against interchange

British consumers filed a class action lawsuit against MasterCard Worldwide July 6, 2016, seeking relief from what they describe as "illegal card charges" that violate terms and conditions of the Consumer Rights Act that became effective in October 2015.

Visa Inc. was excluded from the case, due to legal counsel's contention that Visa has set its rates at a "reasonable level." Grievances highlight growing dissatisfaction with credit card pricing models that led to actions by the European Union and U.S. retailers against payment card brands.

Legal analysts noted that MasterCard may have to pay as much as £19 billion ($24.5 billion) in collective damages if the court rules in favor of the plaintiffs, who represent all British consumers except those who specifically opt out of the class action.

The case, reported to be the largest class action in British history, follows a 2007 ruling by the European Commission that found MasterCard's interchange fees violated competition law between 1992 and 2007. MasterCard subsequently reduced fees in 2008 but challenged the legality of the EC ruling. While the case was finally closed in 2014, the new British claim shows the fight is far from over.

"The prices of everything we all bought from 1992 to 2008 were higher than they should have been as a result of the unlawful conduct of MasterCard," stated Walter Merricks, legal representative of the UK consumer class. "My aim is to get the redress to which UK consumers are entitled and to ensure that MasterCard cannot hold on to the illegal profits it made. This case should send a signal to companies that break competition laws at the expense of UK consumers that they do so at their financial peril."

Merricks, Commander of the Most Excellent Order of the British Empire and a former UK Chief Financial Services Ombudsman who has managed an array of grievances against financial institutions, is working with London-based law firm Quinn Emanuel and Chicago-based Gerchen Keller Capital LLC, to establish a process flow for orderly distribution of funds to millions of UK consumers involved in the settlement.

Consumer Rights Act

Great Britain's far-reaching Consumer Rights Act, enacted in October 2015, replaced the former Sale of Goods, Unfair Terms in Consumer Contracts Regulations and Supply of Goods and Services acts. Designed to protect all facets of consumer rights, the law protects product quality, merchandise returns, digital content rights and delivery rights. In addition, goods should be:

  • Of satisfactory quality: Goods shouldn't be faulty or damaged when you receive them.

  • Fit for purpose: Goods should be fit for the purpose they are supplied for, as well as any specific purpose you made known to the retailer before you agreed to buy the goods.

  • As described: Goods supplied must match any description given, or any models or samples shown at the time of purchase.

The Act further stipulates that consumers have up to 30 days after purchase to request a full refund. "After 30 days you will not be legally entitled to a full refund if your item develops a fault, although some sellers may offer you an extended refund period," the Act stated.

Aggregated claims

Proceedings against MasterCard, based on the allegations that the card brand's egregious pricing violated the terms of the Consumer Rights Act and harmed UK consumers, are expected to begin in the fourth quarter of 2016. Legal analysts who support the measures have called the landmark case a justified attack against unlawful, anticompetitive conduct that has resulted in untold losses to millions of consumers.

"That harm, likely to be in the hundreds of pounds, is not large enough for any individual consumer to bring their own claim," stated Boris Bronfentrinker, Lead Partner at Quinn Emanuel. "But by aggregating the claims and bringing them on a collective basis, all UK consumers who lost out will get the compensation they are owed."

MasterCard's share price, investor confidence and loyal consumer following will be adversely affected when the full scale of the harm it caused to UK consumers is revealed, Bronfentrinker added. These comments reveal the transparently opportunistic nature of the class action, according to anonymous sources familiar with the lawsuit.

New regime, new precedent-setting case

Great Britain marked a new milestone July 13, 2016, when former Home Secretary Theresa May was sworn in as prime minister. She replaced David Cameron, who resigned after the country voted to leave the European Union. In her initial remarks, Prime Minister May pledged to support "all of our citizens, everyone, whoever we are and wherever we're from." Consumer groups are cautiously optimistic that the new government will honor existing buyer protections, as the country prepares to withdraw from the EU.

Preparations are underway at the Competition Appeal Tribunal, where the case against MasterCard will be presented. Legal proceedings will include a certification hearing, followed by a general hearing that is expected to begin in 2018, barring any settlement offers by MasterCard. end of article

Editor's Note:

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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