ATM ISOs Sue Visa And MasterCard over Surcharge Restrictions

A trade group of ATM independent sales organizations on Wednesday filed a proposed class-action lawsuit against Visa Inc. and MasterCard Inc. alleging that network rules illegally forbid them from imposing lower surcharges for ATM transactions that go over the rails of unaffiliated electronic funds transfer networks. Those anti-discrimination rules require uniform surcharge pricing and represent an unlawful restraint of trade that violates the Sherman Antitrust Act, the National ATM Council says.

The Jacksonville, Fla.-based National ATM Council filed the suit in U.S. District Court in Washington, D.C., and names itself and 13 ATM ISOs or their affiliates as plaintiffs. The suit seeks class status representing about 350 ATM ISOs registered with Visa and MasterCard as well as an unspecified number of their affiliates. Besides naming Visa and MasterCard and some of their affiliates as defendants, it also names banks, which formerly owned Visa and MasterCard and issue debit cards, as “non-party co-conspirators.”

In all, non-bank companies operate about 200,000 ATMs, slightly more than half of all U.S. ATMs, the National ATM Council says. In addition to receiving interchange from card issuers, ATM ISOs generate much of their revenue by surcharging cardholders.

The vast majority of U.S. debit cards now carry the logos of Visa or MasterCard on the front and those of one or more EFT networks on the back. Those could include the Visa-owned Plus ATM network, MasterCard’s Cirrus, or unaffiliated PIN-debit networks such as Star, NYCE, Pulse, Accel-Exchange, or others.

The unaffiliated EFT networks may have lower transaction pricing than the Visa or MasterCard networks, but Visa and MasterCard’s rules forbid ATM ISOs from reflecting those differences in their surcharges, says the National ATM Council’s attorney, Jonathan L. Rubin of Rubin PLC, Washington, D.C. ATM ISOs don’t consider refusing to accept Visa or MasterCard debit cards to escape the no-discrimination clauses to be a viable option.

“We’re talking about independent businesses,” Rubin tells Digital Transactions News. “These businesses aren’t owned by banks and aren’t owned by the networks. They can’t price the way they want to price. That’s the essence of the complaint.”

Neither Visa nor MasterCard would comment.

Rubin says the issue isn’t new, but ATM ISOs’ complaints so far have fallen on deaf ears. “There’s been some discussions, as we understand it, in the industry. It’s a known problem,” he says. “Folks were hoping the DoJ [U.S. Department of Justice] would take some action. Nobody likes to go into litigation but nothing got done for years.”

The Council seeks injunctions that would ban the no-discrimination rules, funding by Visa and MasterCard for programs to inform ATM operators and cardholders about their rights regarding ATM transaction routing, and unspecified damages that could be trebled.

The National ATM Council announced its formation in September from the merger of The National Association of ATM ISOs and Operators and another trade group, the Alliance of Specialized Communications Providers. The Council claims it members own the majority of non-bank U.S. ATMs.

The anti-trust lawsuit is just one more development keeping the payment industry’s legal and regulatory controversies in the news. U.S. Rep. Peter Welch, D-Vt., on Thursday called on Attorney General Eric Holder to investigate whether big banks are coordinating their fee strategies in violation of federal anti-trust laws. Welch cited Bank of America Corp.’s planned $5 monthly debit card usage fee, new card or account fees by other banks in the wake of the Durbin Amendment’s new debit card interchange price controls taking effect, and statements by bank trade groups as signs of “possible efforts to coordinate fee increases.”

On Wednesday, two Congressmen announced a bill that would repeal the Durbin Amendment. The bill quickly drew support from banks and opposition from retailers.

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