Lawsuits and Credit Cards: The Winners and Losers

What's Hot

2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

From overdraft fees to arbitration clauses, judges are shaping the credit card industry more than ever before.

This post is from partner site

Over the past four years, Congress and the Federal Reserve have passed and enacted many rules that changed the credit card industry. While the CARD Act and other reforms have received the headlines, the judicial branch quietly left its mark on the credit card business. These legal rulings have cost banks and credit card issuers hundreds of millions of dollars – and may have indirectly led to higher rates and fees for consumers.

“Whenever banks incur additional costs or have their revenue stream cut in one area, they typically make up that money by raising the rates or fees in another area. And we, the consumers, will usually be the ones paying the price for those additional rates or higher fees,” says Bill Hardekopf, CEO of

Here is a look at some of the recent legal actions that have had a dramatic effect on the credit card industry…

Interchange fees

Interchange fees remain a battleground between banks and retailers. Last year, regulations lowered the interchange fee that retailers had to pay banks for debit card transactions. But the rules didn’t address the interchange fee for credit cards. Retailers have turned to the courts to litigate their way to lower interchange payments for credit cards.

Retailers want to add a fee when a customer pays with a credit card, but Visa and MasterCard currently prohibit this. A possible settlement may allow merchants to add a surcharge on credit card transactions. This would help retailers cover the cost of accepting credit cards by passing the fee to consumers and raising the cost of the purchase.

Merchants have filed more than 50 lawsuits since 2005 to argue that Visa, MasterCard, and several banks, including Bank of America, J.P. Morgan Chase, Wells Fargo, Capital One, and Citigroup, have collaborated to fix the fees that merchants pay to accept cards, a violation of antitrust laws.

The trial date is set for September, but an earlier settlement is possible. In the meantime, banks are setting aside cash to pay for the regulations. According to The Wall Street Journal, financial analysts have speculated the pre-tax bill would run about $1.2 billion to $1.8 billion if MasterCard and rival Visa Inc. settle the suit. MasterCard set aside $495 million in its fourth quarter. The Wall Street Journal reported in January that Visa set aside $1.6 billion to cover potential costs from pending merchant lawsuits.

Marketing practices

Discover is facing regulatory action by the Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau over its marketing of fee-based products like payment protection and other add-on services. Discover estimates that possible losses could exceed $100 million.

According to The Wall Street Journal, the company has been accused in lawsuits of misleading marketing tactics to get consumers to sign up for services.


In January, the Supreme Court ruled that consumers who sign a credit card agreement that features an arbitration clause don’t have the option to dispute any charges or fees in the courtroom. This applies to almost every person who has a credit card, since nearly all credit cards have an arbitration clause tucked into the fine print. The arbitration clause may restrict consumers from joining class action lawsuits against a company.

Overdraft fees

In November 2011, a federal judge in Miami gave final approval for a $410 million settlement in a class action lawsuit over Bank of America’s overdraft fee. The settlement was divided among the more than 13 million Bank of America customers who had an overdraft during the past decade. These customers claimed the bank processed debit card transactions in the order of highest to lowest dollar amount, so Bank of America could maximize the overdraft fees customers were charged.

Foreign fees

Also in November 2011, the court gave final approval of a Currency Conversion Fee Antitrust settlement over how the credit card companies charged fees when purchases were made outside the United States. Nearly $276 million was distributed to 10 million consumers to compensate them for the setting and disclosure of foreign currency conversion fees (lawyers received more than $51 million). Some of the defendants in the case were Bank of America, Chase, Citibank, MBNA, Visa, and MasterCard.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: Lookin’ Good! How to Get a Killer Deal on Eyeglasses

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,972 more deals!