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A $30 billion settlement between Visa Inc., Mastercard Inc. and retailers to cap credit-card swipe fees is facing potential rejection by a federal judge in Brooklyn, which would be a setback in the ongoing litigation that has spanned two decades.

According to court records, Judge Margo Brodie of the US District Court of the Eastern District of New York expressed her reluctance to approve the deal during a hearing on Thursday (June 13).

Visa-Mastercard Swipe Fee Deal in Peril

Brodie has not made an official ruling yet, and the decision, which is anticipated to be announced in the near future, remains subject to potential changes.

Retailers have been engaged in a longstanding battle against the costs associated with processing card payments, commonly referred to as interchange fees.

A significant portion of those fees are transferred to the banks that issue the cards, including major players such as JPMorgan Chase & Co. and Citigroup Inc, Bloomberg reported.

The agreement, which was disclosed in March and required court authorization, would have given merchants the option to impose additional fees on customers when using Visa or Mastercard credit cards.

Upon the announcement of the deal, it was revealed that the parties involved had also planned to implement pricing tactics to guide consumers towards more affordable cards.

Mastercard described the settlement as a "fair resolution" that provides businesses with increased flexibility in handling card transactions, while Visa referred to it as a "appropriate resolution" to the long-standing case that has spanned almost two decades.

The settlement, which was announced on March 26, aimed to address the majority of claims in the ongoing nationwide litigation. Small businesses made up over 90% of the merchants involved in the settlement.

According to Reuters, many businesses have expressed frustration over the high swipe fees imposed by Visa and Mastercard for processing card payments.

Additionally, they have accused the companies of preventing them from directing customers towards more affordable payment options.

Swipe Fee Increase

The total amount of swipe fees reached a staggering $172 billion, with a significant increase of over double in the past decade, as reported by the Merchants Payments Coalition. This coalition represents a wide range of businesses including retailers, grocers, convenience stores, and gas stations.

Additionally, it is worth noting that these fees are projected to continue rising in the coming years, as indicated by the opening of a new tab in 2023.

As part of the settlement, the average swipe fee, which currently ranges from 1.5% to 3.5%, will decrease by a minimum of 0.04 percentage points for a period of three years. Visa and Mastercard have also agreed to implement rate caps for a period of five years, as well as eliminate anti-steering provisions.

Opponents of the proposal included the National Retail Federation, the largest trade group for retailers worldwide.

The settlement has been criticized for being "manifestly insufficient" and offering only "meager and temporary" benefits. Critics argue that it still allows Visa and Mastercard to control swipe fees and imposes a "virtually limitless" ban on future claims by merchants.