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MasterCard Faces Claim of £19 billion For Overcharging Users

mastercardMasterCard is facing a penalty charge of £19 billion in damages in a class action lawsuit in the United Kingdom.

The collective action lawsuit has been filed by U.S law firm Quinn Emanuel on behalf of the former Chief Financial Ombudsman, Walter Merricks. The lawsuit has been filed under the newly passed legislation, the Consumer Rights Act 2015 which permits collective damage claims.

This is UK’s biggest claim in legal history and is the first one under the act which allows for collective action for loss borne by a class of people.

According to Merricks, MasterCard unlawfully charged high interchange fees for 16 years. These fees are charged by the company to stores when shoppers use their cards to pay and are passed onto the shoppers through inflated prices of goods and services. According to the charges, shoppers have been overcharged by as much as £400 due to excess charges in shops.

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In a statement, Walter Merricks said

To be clear, there is no question that MasterCard acted illegally in the way it conducted its business, a business that affects all of us. All of us overpaid to the tune of up to £19 billion during a period lasting 16 years. This case should send a signal to companies that break competition laws at the expense of UK consumers that they do so at their financial peril.

According to Merricks, both the company and retail industry experts knew of the practice but did nothing to address it. The European Court of Justice had declared in 2014 that such fees were in violation of EU’s antitrust laws. In April last year, the European Parliament and the Council of the European Union passed the Interchange Fee Regulation, which restricts charges at 0.2% for debit cards and at 0.3% in the case of credit cards,which came into force in December.

MasterCard has said that it completely disagrees with the claim. The company has been battling the European Commission over lowering of its fees, with a long legal battle that ended in 2014.According to the company, the convenience provided to the consumers by the use of the cards far outweighed the charges paid.

Experts point out that Mastercard’s biggest rival Visa has agreed to amend its charges to follow EU law. Alex Neill director of policy and campaigns Which? a consumer rights protection firm said that this landmark case would ensure that consumers who have been illegally charged by MasterCard were returned the money they were owed.

The case is likely to be heard in the Competition Appeal Tribunal in September.

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