£14bn damages claim filed against MasterCard by former chief ombudsman
A £14 billion damages claim has been filed against MasterCard by the former chief ombudsman of the Financial Ombudsman Services.
Walter Merricks argues that the credit card provider owes UK consumers a collective £14 billion for charging “unlawfully high” ‘interchange fees’ between 1992 and 2007.
These so-called interchange fees are levied by credit card companies and paid by retailers when processing card transactions. However, retailers pass these fees on to consumers in the prices they charge for goods. So while you will never be asked to pay an interchange fee yourself when using a debit or credit card, you indirectly do so – even when paying by cash.
Mr Merricks says these fees were a “significant cost” for retailers that were then passed on to consumers through increased prices of goods and services. He adds that all UK consumers, including cash purchasers – and not just MasterCard holders – have lost money as a result. In 2007, the European Commission told MasterCard to reduce the level of its fees.
The next stage in the process is for the Competition Appeal Tribunal (CAT) to allow the action to proceed. Quinn Emanual, the law firm representing Mr Merricks, expects this hearing to go ahead in late 2016, after which a timetable will be set with a trial likely to happen about mid-2018.
Shoppers don’t need to do anything at this stage as the claim has been filed as a class action on behalf of all UK consumers. If Mr Merricks wins his case and damages are awarded, Quinn Emanual says consumers will be invited to make a claim for any compensation owed.
Mr Merricks adds: “The filing of this claim is the first step towards consumers obtaining compensation for what MasterCard did. I am confident that the CAT will authorise the claim to go forward, and I look forward to the opportunity to present our case. This is a watershed moment for consumer redress in this country.”
MasterCard, however, rejects the claims. In a statement, the company says: “Now that the claim has been filed, we will take time to review it in detail, however we continue to firmly disagree with the basis of this claim and we intend to oppose it vigorously.”
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.