Visa Inc. 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 “nonreward” Visa credit card, under terms of its settlement of an antitrust suit brought by the U.S. Department of Justice, the card brand announced last week.
The terms of the settlement, disclosed in the company’s quarterly earnings report, are similar to the antisteering 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 Worldwide announced a preliminary settlement with the Justice Department and seven states on Oct. 4 (
The new rules will expand merchants’ ability to offer discounts for their preferred form of payment, though they will not be able to pick and choose among issuing credit unions and banks.
Merchants could offer incentives to steer customers to cheaper card brands. For example, a merchant that 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 AmEx logo. AmEx, however, declined to settle with the Justice Department (
Credit cards that offer rewards programs cost merchants more to process because they tend to have higher interchange rates, 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 legislation.
