Mastercard Commits to Lowering U.S. Interchange for Small Businesses and Broader Merchant Community

Mastercard (NYSE: MA) has reached an agreement to reduce its U.S. credit card interchange rates for at least a five-year period as part of a legal settlement with merchants.

The settlement, which also features a set of adjustments to Mastercard’s network rules, allows small businesses and all merchants to continue to benefit from accepting electronic payments while delivering consumers a simple and secure way to pay.

The agreement – agreed to by Mastercard, Visa and the court-appointed class counsel – provides all merchants with clarity and certainty on several areas related to their acceptance of payment cards, including:

• Interchange rate reduction – Payment networks, including Mastercard, will reduce the published and effective interchange rate on U.S.-issued consumer credit and commercial credit transactions at U.S. merchant locations.

• Five-year rate cap – The interchange reduction will effectively serve as a cap for a period of five years and will apply to all U.S.-issued credit programs, including new products required to be accepted under the Mastercard brand. The effort delivers merchants the certainty and visibility of their acceptance programs while supporting continued competition within the industry.

• Simplified surcharging and discounting rules – As part of the settlement agreement, the networks will activate a simplified approach to credit card transaction surcharging, providing merchants more optionality. These rules will maintain core consumer protections and transparency, replacing standards that had been updated in 2012.

“This agreement brings closure to a long-standing dispute by delivering substantial certainty and value to business owners, including flexibility in how they manage acceptance of card programs,” said Rob Beard, Chief Legal Officer, General Counsel and Head of Global Policy at Mastercard. “As the court reviews the settlement, we will focus our energy on continuing to provide consumers, small businesses and all business owners what they expect from Mastercard – a better payments experience, strong value and peace of mind.”

The settlement is subject to final approval by the Eastern District Court of New York. Upon final approval of the class settlement by the court, Mastercard will have resolved the vast majority of all pending U.S. merchant litigations that are directed at seeking changes to the company’s interchange structure and merchant acceptance rules.