Visa, MasterCard must reimburse customers
Bloomberg News
Apr. 9, 2003 12:00 AM
OAKLAND - Visa International Inc. and MasterCard International Inc. hid foreign exchange fees and must give customers refunds, a judge ruled Tuesday in a lawsuit that could cost the companies as much as $800 million.
Alameda County Superior Court Judge Ronald Sabraw ruled that Visa and MasterCard intentionally concealed a 1 percent currency conversion fee. He ordered the companies to submit a plan of restitution by April 28, said Allan Steyer, an attorney for the consumer who filed the lawsuit. The companies denied the charges and said they will appeal.
The ruling is the second legal setback this month for Visa and MasterCard, the two biggest credit card companies. Last week, a New York judge said Visa and MasterCard must face a suit seeking $39 billion brought by Wal-Mart Stores Inc. and other merchants accusing them of forcing stores to accept their debit cards.
"They haven't been on a roll in court," said Reilly Tierney, a credit card analyst at Fox-Pitt Kelton Inc. "I think people have found them to be an abusive cartel for a long time."
In the California case, Visa and MasterCard, bank-owned associations, said it was up to the banks that issue credit cards to inform customers.
"Judge Sabraw is ignoring the fact that consumers naturally understand that commercial suppliers of goods and services impose a markup over their costs," said Noah Hanft, MasterCard's general counsel, in a statement.
The plaintiffs had sought as much as $500 million. They estimated that the companies together made more than $800 million in fees since 1996, according to a statement distributed by Steyer's law firm, Steyer Lowenthal Boodrookas Alvarez & Smith LLP. Sabraw didn't specify a refund amount in his ruling.
Visa earned $166 million in currency conversion fees in 2001, and MasterCard earned $195 million from 1996 to 2000, according to testimony presented in the case.
MasterCard spokeswoman Sharon Gamsin declined to estimate the ultimate cost to the company or whether the refund costs would be paid by member banks.