(Bloomberg) -- Visa Inc. and Mastercard Inc. are getting close to settling a 13-year-old lawsuit over fees charged when merchants accept card payments, according to a person familiar with the agreement.
The two card companies and banks including JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. would pay merchants about $6.5 billion under the terms of the settlement, the person said, asking not to be identified because the deal hasn’t been made public.
The lawsuit, brought on behalf of 12 million merchants nationwide, was filed more than a decade ago. A federal appeals court in 2016 rejected a $5.7 billion settlement of the claims, which center on whether companies improperly fixed credit-card swipe fees, the charges also known as interchange that are paid by merchants when consumers use credit or debit cards.
Mastercard said in a filing on Thursday that it will boost its reserves by $210 million this quarter “as a result of advances in negotiations related to the monetary damages claims.” Earlier this week, Visa said in a filing it had added $600 million to its litigation escrow account. Representatives for both companies declined to comment beyond the filings.
Visa already had about $884 million in its litigation escrow account as of March 31, the company said in a quarterly regulatory filing. Mastercard reported that it had reserved $737 million for the merchant litigation as of that date.
The new agreement doesn’t include provisions that held up the 2016 settlement attempt, including wording that would prevent merchants from ever suing again over interchange rates even if they don’t take money from this settlement, the person said.
“The parties worked with two well regarded mediators for more than a year to reach this agreement and I do not expect it to be controversial,” said Mitch Goldstone, president and chief executive officer of ScanMyPhotos.com, one of the most active class representatives in the swipe-fee litigation.
The Wall Street Journal reported the agreement earlier Thursday.
Lawyers for both sides asked the judge for more time to reach an agreement, according to a June 27 written request filed with the court. They had previously agreed on April 17 to try to reach a settlement by June 25. In the latest filing, they set a July 17 deadline. On Wednesday, lawyers said they would give Magistrate Judge James Orenstein a status report on July 10.
Visa rose 0.5 percent to $131.62 at 12:08 p.m. in New York, while Mastercard advanced 1.3 percent to $195.63.
The $90 billion-a-year swipe-fee industry is a profit center for many financial firms and has been under attack from all angles. The Dodd-Frank Act earlier this decade limited the amount of interchange banks could charge on debit-card transactions. Major retailers are exploring ways to get consumers to keep money with them to cut down on swipe fees. And fintech startups are attempting to be cheaper alternatives for merchants.
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-01720, U.S. District Court, Eastern District of New York (Brooklyn).
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