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Local Merchants Ponder Participation in Class-Action Settlement over Credit Card ‘Swipe’ Fees

Some local business owners receiving notices in the mail about a $6 billion credit-card class-action lawsuit settlement are poring through the 20-plus pages to try to understand whether and exactly how they should participate.

The opt-out notifications are going out to any local merchant who has accepted Visa or MasterCard credit or debit payments from customers between Jan. 1, 2004, and Nov. 28, 2012, because they could participate in a class-action suit against the companies. The companies are accused of violating the Sherman Anti-Trust Act by setting high interchange (processing) fees and imposing rules that limited merchants from steering customers to other payment methods. (Scroll down for the complete settlement notice.)

Visa, MasterCard and the nation’s biggest banks have agreed to pay $7.3 billion to millions of merchants in a settlement, which still requires judicial approval. Part of that pot — $1.2 billion in total — would go toward temporarily lowering “swipe” fees for an eight-month period tentatively to begin by July 29.

Many local merchants, who were unaware of the seven-year lawsuit until receiving the notice, are looking at their options and coming up with questions.

If they opt out of the settlement, they won’t receive anything from the billion-dollar payout pool but could file their own individual lawsuit against the companies.

If they do nothing by the exclusion deadline of May 28, they will receive claim forms to fill out after the court approves the settlement. Payouts would depend on the money available to pay all claims and the total dollar value of all valid claims filed, among other aspects.

Several card-processing companies, such as Santa Barbara-based Axia, are actively helping their merchants file claims.

Axia regional manager John McManigal said the settlement affects hundreds of the company’s Santa Barbara business clients.

“We’re trying, No. 1, to tell them exactly what the settlement means to them,” McManigal told Noozhawk. “Then, what they should do. There’s a lot of unknowns out there.”

Eric Onnen, president Santa Barbara Airbus, said he has been looking for some direction about what to do from an informed, yet-to-be-identified adviser.

After reading the cumbersome notice, Onnen said he doesn’t know if he would need to pay anything to participate or if the amount he could receive would be equivalent to what he’s entitled to.

“We do a significant amount of our transactions via credit cards,” Onnen said. “They issue cards that provide some kind of additional benefit to their customer, and they charge a higher fee. We, as merchants, of course pay that higher fee. The key thing for us small businesses in this thing is what is the right position for us to be in?

“If I have to make a selection now, I would opt to be in part of it,” he continued. “It was a cost of business that we had recognized and paid for, and now if we get something out of it, it’s better than it was before. The ultimate of this is that the public was damaged as well.”

Doing absolutely nothing is probably best, according to Craig Smith, a law professor at Santa Barbara College of Law.

Locals do not need their own lawyer unless they’re planning to file their own lawsuit, Smith said. Otherwise, class-action attorney fees are approved by the court and are paid from a portion of the payout pool.

The settlement, which could be approved in a fairness hearing in September, does not make merchants liable to customers, he said.

“I can say with 100 percent confidence that opting out, or staying in for that matter, would not expose a merchant to being sued by consumers who were overcharged,” Smith said. “Merchants who are within this class should keep in mind that the named class representatives are merchants like themselves, and the claims they brought against the credit-card companies are typical of all members of the designated class.

“The claims of a consumer would be different from the claims that a merchant would have,” he continued. “Of course, anybody can sue anybody else for anything. But nothing about opting out or remaining in the class action makes a future suit by a consumer against a merchant any more likely.”

Noozhawk staff writer Gina Potthoff can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

  Credit-Card Class-Action Settlement Notice


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