The longstanding dispute over credit card fees and paymentpractices appeared to come to a close last week when the U.S.District Court for the Eastern District of New York announced apreliminary settlement in a dispute between retailers, the majorcard brands and at least nine major card issuers.

At its heart, the complicated dispute addressed both the rulesunder which the card brands insisted retailers accept their cardsas well as the fees they paid for that acceptance. If approved, thesettlement will see $8.25 billion eventually move from the cardbrands and major card issuers into the coffers of participatingretailers as well as give retailers the right to levy a surchargeon card transactions.

Even though the settlement requires substantial sums of moneyfrom the payments industry and threatens to undercut credit cardinterchange in the future, reactions from bankers the major cardbrands and industry coalitions to the settlement were largelyfavorable and drew a contrast between this settlement, which hadbeen worked out in a lengthy legal process, and the Durbinamendment.

 “The long political conflict over interchange fees isfinally over, settled by a well-established legal process, whichbrought together retailers and the card industry for a negotiatedresolution,” said a spokesman for the Electronic Payments Coalition, an association of card brandsand issuers, including credit unions, that was formed to opposechanges to the card interchange system.

“The deliberate and measured approach of the settlement processis in stark contrast to that of the Durbin amendment, which waspassed in the dark of night with no review of its consequences andvirtually no public debate,” the EPC added. “These government pricecontrols shifted $8 billion from banks to the retailers with noevidence that consumers are seeing lower prices as a result. Allparties have endorsed this agreement. The legal process worked andshould send a signal to Congress that it is wrong to pick winnersand losers in a complex dispute between two industries.”

American Banking Association CEO Frank Keating echoed the EPC with similar thoughts.

“Let's be clear–retailers, not consumers, benefit from today'sresolution,” Keating said. “This settlement even provides merchantswith the ability to impose 'checkout fees' on customers just forusing credit cards. This type of behavior is nothing new forretailers. Even after receiving an $8 billion annual windfall fromthe Durbin amendment, they refused to pass along promised savingsto customers and sued the Fed for even more profits. These types ofissues are best resolved by market participants. Recent historyillustrates the negative consequences for consumers whenpolicymakers choose winners and losers and distort the marketplaceAn excellent example is the ill-conceived passage of the Durbinamendment, which led to increased profits for big-box retailers andno savings for consumers.”

“Only time will tell if this history will repeat itself, asretailers continue to show little regard for consumers. While thebanking industry may not like all the results in this case, ourindustry is ready to put this matter behind us and continue playinga critical role in our nation's economic growth and job creation,”he added. 

By contrast, CUNA and NAFCU were more restrained in theircomments, reflecting the fact that, unlike in the fight over theDurbin amendment, credit unions did not play as key a role in thislitigation. Although credit unions were not directly involved inthe settlement, they have been members of different paymentindustry coalitions that were formed to protect credit and debitcard interchange and which have had input into the settlement.

CUNA CEO Bill Cheney emphasized that the settlement ends alongstanding dispute in the payment industry.

“Importantly, this settlement means the issues in this case arenow closed, once and for all. Even though consumer-owned creditunions were not part of the lawsuit, the settlement announced todayaffects all credit unions with credit card programs. We all knowthat interchange revenue enables credit unions to provide essentialand cost-effective credit card services to their consumer members.We also know that the temporary reduction in interchange revenuethat credit unions will experience will not likely find its wayinto the pockets of consumers but will more likely into those ofmerchants. Consumers win nothing in this settlement.”

NAFCU was a little more pessimistic.

“It's a shame that once again consumers stand to see theirwallets shrink with the risk of new check-out fees, instead of theonce-promised price cuts, as the big-box retailers continue to getricher,” said NAFCU CEO Fred Becker, adding “We continue to monitordevelopments for any potential ramifications on credit unions.”

Meanwhile, payment industry analysts largely have said it is tooearly to know how the settlement will impact the use of cards andthus credit union card income. First, many estimate that gettingthe details to the settlement worked out could take between eightmonths and a year. Second, it's unclear how many retailers willreally levy a surcharge credit cards purchases. Analysts point outthat the decision demand such a charge or not can be especiallydifficult as it pits the merchant's desire to avoid spending moreto process the transaction against the consumer's desire for moreconvenience in payments and the well-documented trend amongconsumers to spend more when paying with a card.