Visa, MasterCard ordered to refund $800M
By Michael Liedtke
Associated Press
SAN FRANCISCO — A judge has ordered credit card giants Visa and MasterCard to refund an estimated $800 million to U.S. customers who paid a hidden fee on purchases made in foreign countries.
Judge Ronald Sabraw's decision released yesterday finalized a tentative ruling that had been under court seal since February.
The case centers on a 1 percent surcharge Visa and MasterCard add to the transaction amount of credit card charges requiring foreign currency to be converted into U.S. dollars.
Concluding Visa and MasterCard have been concealing the conversion fee, Sabraw ordered refunds dating back to 1996.
Attorneys representing consumer interests in the three-year-old case described the decision as vindication for millions of cardholders who had been misled for years about the costs of their foreign charges.
Visa, based in Foster City, Calif., and New York-based MasterCard called the decision confounding and vowed to appeal.
Although his decision said the credit card conversion fees appear reasonable, Sabraw concluded the surcharges undermined the free market because most consumers aren't aware of them.
If consumers knew about the fees, Sabraw reasoned they might look for currency conversion alternatives — discriminating behavior that could pressure the credit card companies to lower their fees.
As part of his ruling, Sabraw ordered Visa and MasterCard to better disclose the conversion fees in the future.
Visa and MasterCard ridiculed the notion that fees are secret, noting that the surcharges have been written about in newspapers and travel magazines for years. The credit card companies also contended that the banks issuing their cards ultimately should be held responsible for explaining the currency conversion fees to their customers.
A federal lawsuit in New York also targets Visa and MasterCard for their conversion fees. That suit also names several major banks that issue Visa cards and MasterCards.
The credit card companies said there's nothing wrong with bundling the conversion fees into the transaction prices that appear on customer bills.
Consumer attorneys contend cardholders have a right to know when financial services providers tack on extra fees to the price of the goods and services sold by another party.
