Amex Reaches Surcharge Settlement With Retailers

NEW YORK -- American Express Co. will pay as much as $75 million to settle two class-action suits alleging the credit card processor's policies have increased costs retailers must pay to accept its credit and charge cards. The company also agreed to alter some rules to make conditions more favorable for merchants.

According to the Wall Street Journal, Amex will ease rules that limit merchants' ability to surcharge customers who pay with the company's cards. It will also pay as much as $75 million in attorneys' fees in both cases.

The settlements still require court approval.

"Our expectation is that merchants are going to be able to use that newfound power" to lower their costs, said Gary Friedman, an attorney who represented merchants in the litigation.

In a statement, Tim Heine, managing counsel for Amex, said the agreed-upon changes would give merchants "some additional flexibility," but he added that "surcharging is fundamentally anti-consumer."

As part of the agreements, retailers will be prohibited from suing Amex regarding some of its policies for 10 years after these changes are made.

Reacting to the settlement, the Merchants Payments Coalition (MPC) said this deal will hurt both consumers and merchants. "The settlement does nothing to lower credit card swipe fees, while making sure the fees will continue to be hidden from consumers and that the big credit card companies can continue to fix prices without competition," said MPC Chairman and National Retail Federation Senior Vice President and General Counsel Mallory Duncan. "The result is that swipe fees will continue to be the fastest-growing expense for merchants and that consumers will keep paying overinflated fees without even knowing it."

Amex is not the only credit card processor facing legal battles over surcharges. As CSNews Online previously reported, Visa Inc. and MasterCard agreed to settle a host of class-action lawsuits for $5.7 billion. As part of that recently approved settlement, both Visa and MasterCard agreed to drop their bans on surcharges.