Visa Settles Antitrust Suit Over Anti-Steering Rules

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SAN FRANCISCO – Visa said last week it will allow merchants to offer discounts or other incentives to steer customers to a particular form of payment, including to a specific network brand or to any card product, such as a “non-reward” Visa credit card, under terms of its settlement of an antitrust suit brought by the U.S. Justice Department.

The terms of the settlement, disclosed in the company’s quarterly earnings report, are similar to the anti-steering provisions of the Dodd-Frank Financial Reform Act, which will enable merchants to steer customers to less expensive forms of payment, including cash or low-cost cards.

Visa and MasterCard announced a preliminary settlement with the Department of Justice and seven states on Oct. 4, but Visa reported last week the settlement has expanded to 20 additional states.

The new rules will expand merchants’ ability to discount for their preferred form of payment, though they will not be able to pick and choose amongst issuing credit unions and banks.

The new rules will allow merchants to offer discounts to customers who use a plain-vanilla, no-rewards Visa-branded credit card over a Visa Signature card that is loaded with perks. Merchants pay more to card issuers for accepting rewards-loaded cards.

Merchants could offer incentives to steer customers to cheaper card brands. For example, a merchant who accepts both Visa and American Express would be permitted to offer a discount or otherwise steer a customer toward a Visa or MasterCard-branded card over one that has an American Express logo.

Credit cards that offer rewards programs cost merchants more to process and Visa and MasterCard require merchants to accept all of their networks’ cards, even if some cost more than others. Merchants try to encourage customers not to use higher-cost cards, a process known as “steering,” which Visa and MasterCard ban in most cases.

Visa and MasterCard issue about 80% of all credit and debit cards.

The settlement comes as the Federal Reserve is proposing fee caps on debit card interchange as required under the Dodd-Frank bill.


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