oth Visa and MasterCard International approved and finalized the terms of their settlements with retailers over debit cards on June 4, 2003. The original settlement in April called for Visa to pay $2.025 billion over 10 years and MasterCard to pay $1.025 billion; however, retailers could receive the money sooner than expected.

Visa and MasterCard agreed to let retailers seek out a financial institution to provide them with the money upfront in exchange for the rights to the association's payments over the next decade, the New York Times reported. The payout would then be less than $3 billion because it would be all at once rather then over 10 years.

Retailers will receive their portion of the settlement based on how many debit card transactions they processed between October 25, 1992 and the April 2003 settlement. The credit card companies agreed to provide access to their databases of debit card transactions so the payout for each retailer can be determined.

As part of the settlement terms, Visa and MasterCard also agreed to lower fees charged to merchants on offline signature debit card transactions. MasterCard's interchange rate modifications are listed below. Visa has not yet released information on changes to its interchange rates.

U.S. District Judge John Gleeson is expected to give his final approval on the settlement in September.

Another Lawsuit

Even with the class-action settlement nearly behind them, not all is over for Visa and MasterCard. Best Buy Co. Inc. filed an antitrust lawsuit against the credit card companies in U.S. District Court in Minneapolis challenging not only their "honor all cards" policy but also fees on check cards, prepaid cards, travel and entertainment cards and regional ATM networks.

Best Buy and other retailers, such as Home Depot, Toys R Us and CVS drug store chains, chose to opt out of the class-action lawsuit filed by Wal-Mart and 4 million other retailers in order to pursue independent claims.

MasterCard Interchange Adjustments

MasterCard made the following changes to its interchange rate fee programs, effective August 1, 2003:

To comply with the settlement of the merchant class-action lawsuit, MasterCard will lower its U.S. consumer debit interchange rate by one-third. MasterCard also will add the following debit card interchange fee programs:

• Convenience (includes Petroleum, Fast Food, Convenience Stores and Movie Theaters)
• Supermarket and Warehouse Club
• All Other

The new debit interchange fee programs apply to all MasterCard-branded debit cards, prepaid cards, stored-value cards, electronic benefits transfer (EBT) cards and payroll cards.

MasterCard's new consumer debit card interchange rates:

• Convenience (23) 1.35% + $0.00
• Supermarket (71, 81) 0.00% + $0.29
• Warehouse Club (91) 0.00% + $0.29
• Consumer Standard (75, 85, 95) 0.97% + $0.10
• Merit I (78, 88, 98) 0.97% + $0.10
• Key-Entered (92) 0.97% + $0.10
• Passenger Transport (93) 0.97% + $0.10
• Merit III (70, 80) 0.97% + $0.10
• Travel Industries Premier Service (97) 0.97% + $0.10
• Public Sector (22) 0.97% + $0.10
• Service Industries (90) 0.97% + $0.10
• Payment Transaction (20) 0.19% + $0.53

MasterCard's consumer credit card interchange rate changes:

• Supermarket (71, 81) will increase 5 basis points from 1.20% + $0.00 to 1.25% + $0.00
• Warehouse Club (91) will increase 15 bps from 1.10% + $0.00 to 1.25% + $0.00
• Key-Entered (92) will increase 10 bps from 1.80% + $0.10 to 1.90% + $0.10
• Merit III (70, 80) will increase 3 bps from 1.40% + $0.10 to 1.43% + $0.10

All other consumer credit interchange rates will remain unchanged.

MasterCard's corporate card interchange rate changes:

• Corporate Face-to-Face (60) will increase 3 bps from 1.40% + $0.10 to 1.43% + $0.10
• Corporate Large Ticket (62) will increase 30 bps from 0.85% + $40.00 to 1.15% + $40

All other corporate card interchange rates will remain unchanged.

MasterCard last made changes to its interchange rates in January 2003 ("MasterCard, Visa Raise Interchange Rates," The Green Sheet, February 10, 2003, issue 03:02:01).