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£14bn claim filed against MasterCard over ‘illegal charges’

Paloma Kubiak
Written By:
Paloma Kubiak

The largest damages claim in UK legal history has been filed against MasterCard for allegedly imposing illegal credit card charges which were passed on to all UK consumers in the form of inflated prices of goods and services.

More than 40 million UK consumers could be in line to receive hundreds of pounds of compensation as a result of the £14bn class action which was filed at the Competition Appeal Tribunal (CAT) today.

The claim, the biggest in legal history, is the first to be filed under the Consumer Rights Act 2015, which enables a collective damages claim to be brought on behalf of a class of people who’ve suffered loss.

In this case, the claim is on behalf of 46 million unsuspecting UK shoppers who allegedly bore the brunt of these ‘illegal’ credit card fees through higher prices of every day purchases whether they paid by cash or card.

More than 600 pages of documents relating to the damages claim has been submitted by Walter Merricks who is representing the class of people in what he called a “watershed moment for consumer redress in this country”.

MasterCard says it firmly disagrees with the basis of the claim.

How has this claim come about?

MasterCard was found by the European Commission to have infringed EU law by imposing charges – known as interchange fees – on the use of MasterCard credit and debit cards which were accepted at more than half a million businesses in the UK.

The claim, led by Walter Merricks, lawyer and former financial services ombudsman, says MasterCard ‘unlawfully’ imposed high card fees for nearly 16 years and that consumers were unaware of the level of the fees or that they were illegal. He says the fees were a significant cost for retailers that was then passed on to consumers through increased prices of goods and services.

It claims all UK consumers, not just MasterCard holders, have lost money as a result, and that MasterCard had the option to accept its card fees were anti-competitive and reach a settlement with the European Commission to lower its fees, but chose not to.

Originally Merricks estimated UK shoppers were overcharged to the tune of £19bn, however because MasterCard’s fees have already been found to be illegal by the Commission, this ‘follow-on’ claim need only prove the damage consumers suffered as a result of MasterCard’s anticompetitive behaviour. Based on expert analysis of the evidence, including recently obtained evidence from MasterCard, Merricks believes the total damage caused to UK consumers to be £14 billion.

He said: “MasterCard charged billions of pounds of unlawfully high fees for its sole benefit and to the detriment of consumers. It has already been found to have broken competition law, the basis of which was to protect consumers, and that cannot be disputed. There is no basis upon which MasterCard can contend that its card fees were not unlawful.

“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.”

Merricks has instructed law firm Quinn Emanuel to handle this landmark case.

Under the rules laid down in the Consumer Rights Act, all UK consumers who have lost out and are now living in the UK will automatically become part of the group of claimants unless they explicitly opt out.

This means that, once the claim is filed, no action will be required by individuals as they will automatically be eligible to receive compensation at the conclusion of the claim. Those not currently living in the UK, but who were during the period 1992 to 2008, will have the opportunity to opt in.

MasterCard opposes claim ‘vigorously’

A MasterCard spokesperson, said: “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.

“We deliver real value through the benefits of security, convenience and consumer protection, and we are committed to investing in our payment services in order to continue to meet the rapidly evolving needs of all our customers.”