The issue surrounds the charging of fees on foreign transactions. According to a recent Reuters report, costs to credit card companies to process foreign transactions averages out to about one quarter of one percent, a fact that proved to be a central part of the class-action lawsuit.
Credit card companies will often assess fees of about 3 percent when handling conversions for transactions involving US-based credit cards made in non-US currencies, into US dollars.
Judge William Pauley of the US District Court in Manhattan noted that claimants believed more than a billion dollars in overcharges were at issue. However the judge noted that there remained a strong possibility that claimants might recover little or no damages had the matter actually gone to trial.
"An astonishing 10,075,834 claims were filed," Pauley wrote.
Credit Card Fees Continue to Plague Consumers
Visa and MasterCard were among the defendants. Bank defendants in the case included Bank of America Corp, Citigroup Inc, HSBC Holdings and JPMorgan Chase & Co.
The judge noted that the delay in reaching a final approval was partly due to the time needed to work out the claims procedure. While noting the overcharges, Judge Pauley did acknowledge efforts made by the bank defendants to improve disclosures, making it easier to compare conversion fees.
"This settlement includes significant changes in the practices by the major banks, which cannot be ignored," he wrote in his 44-page opinion.
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Congress has already passed reforms that are scheduled to take effect in February. However there are many who feel the reforms should be brought in sooner, especially amidst allegations that credit card companies are increasing rates in anticipation of the new statutes coming into effect.
The settlements cover holders of US-issued MasterCard or Visa credit or debit cards and Diners Club credit cards who made foreign transactions between 1996 and 2006.
Judge Pauley called the settlement of the eight-year-old lawsuit "fair and reasonable."