Settlement Reached in Foreign Transaction Fee Class-Action Lawsuit
The United States District Court for the Southern District of New York on Oct. 5, 2011 entered an order for the disbursement of funds from a settlement reached in a class-action lawsuit against Visa, MasterCard, Chase, Citibank, Bank of America, Bank One, HSBC, and Washington Mutual, among others, for alleged impropriety in the establishment and disclosure of foreign transaction fees for credit cards and debit cards. Ten million consumers made claims against the card networks and issuers, and the majority of payouts are expected to be for $18.04 per affected consumer, though high-volume travelers may command more.
More specifically, the plaintiffs argued that the defendants conspired to set and conceal foreign transaction fees and markups from Feb. 1, 1996 to Nov. 8, 2006, thereby violating state and federal antitrust and consumer protection laws.
While the settlement was originally approved on October 22, 2009 and the court ordered the final dismissal of the case (In re Currency Conversion Fee Antitrust Litigation) on Nov. 4, 2009, eleven appeals were subsequently made. Ten of the appeals were withdrawn or dismissed and the court sided against the defendants in the other.
“This decision is unquestionably a victory for consumers,” WalletHub CEO Odysseas Papadimitriou said. “It sends a clear message to card networks and credit card issuers that they cannot hide anything from their customers. What’s more, after years in the court system, it’s good that the victims of these practices finally have some closure in the matter.”
Papadimitriou also spoke on how consumers can avoid foreign transaction fees in the current credit card market.
“The CARD Act requires more transparency from credit card companies,” he said. “That means, among other things, clearer disclosures and the ability to quickly determine whether a given card can be classified as a no foreign transaction fee credit card or not. Over 90% of credit cards have fees for transactions processed outside the United States, and not being aware of this fact can lead to people spending 2% - 3% more on a trip abroad than is truly necessary.”
Only claims postmarked before May 31, 2008 are eligible for settlement money in the Currency Conversion Fee Antitrust Litigation case. Payouts for those who submitted claims prior to this deadline should not be expected immediately either, given the sheer numbers involved.
A related case against American Express (Ross, et al. v. American Express Co., et al) remains pending.
Forex-related cases aren’t the only major class-action settlements involving credit card companies that have made news in the last few months either. On Nov. 7, a $410 million settlement was approved in a case in which consumers alleged that Bank of America processed debit card transactions in such a manner so as to maximize overdraft fee revenue.
Image: Evlakhov Valeriy/Shutterstock
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