The Green Sheet Online Edition
July 13, 2026 • 26:07:01
The newest card brand litigation settlement: Is it worth settling for?
After a cold rejection of their settlement proposal in In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation in June 2024, the card brands Visa and Mastercard (the card brands) have just cleared a substantial hurdle to their newest proposed settlement (the proposed settlement).
On June 9, 2026, Judge Brian Cogan of the United States District Court for the Eastern District of New York granted preliminary approval for the proposed settlement, clearing the way for the court to grant final approval.
The proposed settlement makes several changes to the card brand rules related to surcharging, cash discounting, and the honor-all-cards rule, among others (the card brand rules). However, despite the multiple updates promised, merchants might not see as much of a change as the District Court envisions.
Changes to surcharging rules
The biggest and most meaningful change in merchants' eyes is likely to be the card brands' surcharging rules. Currently, Visa allows surcharging at 3 percent and Mastercard allows surcharging at 4 percent. If the proposed settlement went into effect, both card brands would allow a maximum surcharge of 3 percent. Most materially, the card brands would repeal their competitive cards rule. The competitive card rules are applicable across both card brands and require that if another card network (think American Express or Discover) has (1) a higher cost of acceptance than the card brand or (2) limits a merchant's ability to surcharge credit cards, then the merchant must surcharge the card brand only in the same way as the competing card brand allows surcharging.
This rule effectively serves to limit a merchant's ability to surcharge, as American Express happens to have a higher cost of acceptance than the card brands and also required equal treatment of all its cards until recently (publicly available American Express rules accessible to the author no longer contain the rule requiring merchants to surcharge all cards the same way).
However, the American Express website conspicuously states "[s]urcharging is not applicable for card payments made in the US." Thus, a merchant must choose between surcharging the card brands and accepting American Express.
Thus, while the proposed settlement would lower Mastercard's surcharge cap, it would likely make surcharging easier for merchants. Considering these new rules, merchants not yet surcharging may want to evaluate the viability of surcharging for their business model. Merchants already surcharging should ensure they do not surcharge above allowable levels if these new rules are rolled out.
Updated honor-all-cards rule
According to Judge Cogan, "the central relief offered by the [Proposed] Settlement is repeal of the Honor All Cards rule." The honor-all-cards rule ensures that merchants accept every card presented for payment. Currently, the only stated exception to the honor-all-cards rule is that merchants can choose whether to accept credit cards, debit cards, both or neither.
The proposed settlement would break down credit cards into three categories: (1) standard consumer cards, (2) premium consumer cards, and (3) commercial cards. In the way that a merchant currently must disclose to the card brands whether it intends to surcharge, the proposed settlement would require the merchant to inform its acquirer and the card brands that it will no longer honor all cards.
While modifications to the honor-all-cards rule provide merchants another potential avenue to avoid high-fee cards, the author predicts that merchants will not readily start dishonoring cards. First, merchants that do not accept all cards will potentially cut into the amount of business they receive, which would result in reduced profit.
Additionally, merchants may have a hard time differentiating the cards they accept and the ones they do not.
At worst, a merchant may have to decline a customer's card at the POS after the customer has already swiped, leading to heavy friction at checkout.
Next, fear that similar businesses will continue to honor all cards and absorb the associated interchange fee would also probably prevent merchants from dishonoring cards. Finally, the card brands have indicated they may create tiered interchange rates for similar types of merchants based on their card acceptance practices, meaning that merchants that dishonored cards would pay more in interchange than their counterparts that continued to accept all cards.
The honor-all-cards reform may not be the solution it initially appears to be. As Judge Cogan aptly commented in his order, "[w]hether all merchants will avail themselves of that relief [of the changes to the honor-all-cards rule] is to be seen." Merchants looking for ways to reduce their merchant discount may want to consider dishonoring cards, but only to the extent it does not reduce their business.
Modified discounting rules
The proposed settlement would also relax no-discounting rules. Currently, merchants can discount at the product level, but not the issuer level. It would allow merchants to discount at the issuer level, meaning merchants could offer incentives for customers to use a particular issuer's cards.
However, given the number of issuers, it is unclear whether allowing merchants to discount at the issuer level is a viable option. Merchants already offering discounts likely will not see much more wiggle room in this area.
Rate rollbacks
Visa and Mastercard also proposed lowering the interchange rate and adding a cap based on an average interchange rate minus ten basis points. The proposed settlement also caps interchange on standard consumer cards at 125 basis points.
However, merchant groups like the National Retail Federation and the Retail Industry Leaders Association have noted that a 10 basis point reduction would not provide meaningful relief, and the cap on standard consumer cards is not particularly material since standard consumer cards make up a fraction of the credit cards in use today. Thus, merchants likely will not see a noticeable difference in this area.
Merchant education
The proposed settlement would also allocate $21 million to fund merchant education on proper interpretation of the card brand rules and the benefits of surcharging and cash discounting, among other things. The proposed settlement would also provide special attention to merchants in states where surcharging is limited or prohibited. Merchants should be on the lookout for optional training in the card brand rules.
Closing thoughts
To simplify, the proposed settlement is a mixed bag. Although it does provide more flexibility to surcharge, other solutions are not as meaningful. If asked whether the settlement is worth settling for, the author would state: Probably not. 
Jessica Walsh is a contract attorney who focuses on electronic transactions, including SaaS, merchant processing, agent/reseller, independent sales organization, and other related agreements. She regularly drafts, revises, and negotiates agreements tailored to her clients' operational and regulatory needs. She also advises clients on card brand rules and state regulatory requirements related to differential pricing. Contact her at jwalsh@attorneygl.com.
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