MSE News: Hopes for Mastercard class action appeal 14 August 2017 at 2:21PM in Budgeting & Bank Accounts 5 replies 1.4K views

Former_MSE_Megan_F

Walter Merricks, the man behind a £14 billion lawsuit against Mastercard on behalf of 46 million consumers, hopes to appeal its dismissal...

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'Hopes for Mastercard class action appeal'

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eskbanker

Can MSE please stop perpetuating the myth that "excessive so-called 'interchange fees' [are] the fees a retailer pays to your credit or debit card company when you use your card", which has survived the copy/paste from last month's article about the original dismissal?

Interchange fees are NOT the fees paid by retailers, they're the fees levied between issuing and acquiring banks, but this misapprehension has led to all sorts of accusations on the credit card board by agitated customers who feel they're being 'ripped off', etc, and MSE should be able to understand and accurately represent the difference between interchange fees and merchant service charges....

phillw

eskbanker wrote: »

Interchange fees are NOT the fees paid by retailers, they're the fees levied between issuing and acquiring banks,

The retailers bank doesn't eat the charge though, it passes it on to the retailer.

https://www.visaeurope.com/about-us/interchange/

"When your bank sends your payment to the retailer’s bank (known as the acquiring bank), a small fee is retained. This is called the interchange fee. Visa doesn’t receive any of this fee.

If interchange didn’t exist, your bank would find it difficult to cover the costs it incurs in operating your card services, such as fraud prevention, systems maintenance and customer call centres. If this were the case, your bank may stop investing in innovation, stop issuing cards altogether or increase the fees that you pay for its card services.

Similarly, when the retailer’s bank sends the payment to the retailer, it deducts a small fee – this is called the Merchant Service Charge and incorporates a number of component fees such as the interchange fee, costs to cover services provided by their bank, such as guaranteed payment, and the technology to accept card payments such as a terminal or contactless reader. This rate is negotiated directly between the retailer and its bank. Visa doesn't participate in this process."

eskbanker

phillw wrote: »

The retailers bank doesn't eat the charge though, it passes it on to the retailer.

Yes, agreed that the interchange fee could ultimately be said to be a constituent part of what the retailer pays but they are different and separate charges (as recognised by your Visa quote), in much the same way that (most) retailers can set customer prices independently of what they're paying their wholesaler.

My understanding is that when the interchange cap was introduced, there was no back-to-back legal obligation on acquiring banks to reduce their merchant service charges by the same amount, or indeed at all!

So yes, I agree that merchant service charges effectively include an element to cover the interchange fee but disagree that they're synonymous as suggested by MSE's careless wording....

phillw

eskbanker wrote: »

My understanding is that when the interchange cap was introduced, there was no back-to-back legal obligation on acquiring banks to reduce their merchant service charges by the same amount, or indeed at all!

That appears to be true, I would hope that market forces would have reduced the merchant charges but there is no guarantee that is true.

eskbanker wrote: »

So yes, I agree that merchant service charges effectively include an element to cover the interchange fee but disagree that they're synonymous as suggested by MSE's careless wording....

If mastercard had higher intercharge fees than visa, Merchant fees when accepting mastercard were agreed to cover the higher intercharge fees and retailers weren't allowed to charge different amounts based on the payment method then the retailer may have set prices higher to compensate. Or not, some round to *9.99

While I generally agree with being accurate, I don't see how correcting it would change the sentiment of the article.

eskbanker

phillw wrote: »

While I generally agree with being accurate, I don't see how correcting it would change the sentiment of the article.

Agreed - I wasn't suggesting that it would directly affect the thrust of this particular article, but it was more the wider point about the lack of understanding of the difference between interchange rates and merchant service charges.

I've seen plenty of posts on the credit card board along the lines of 'retailer X imposed a card surcharge of 2%, which must be illegal because the EU introduced a cap of 0.3% in 2015', where the fact that they're comparing apples with oranges completely passes many posters by, but it doesn't seem unreasonable to expect financial journalists to know the difference and use the correct terms accordingly....