Visa and Mastercard have reached a revised $38bn settlement with US merchants who allege that the card networks imposed excessive charges for processing credit card payments, reported Reuters.

The case, spanning two decades, centres on allegations that the card networks and associated banks conspired to overcharge businesses through so-called “swipe fees” for credit card transactions.

The proposed deal follows a previous $30bn settlement offer that was rejected in June last year by US District Judge Margo Brodie, who found it insufficient. Approval from Brodie is required for the new agreement to take effect.

Retail trade group in the US, National Retail Federation (NRF), and the Merchants Payments Coalition have voiced that the agreement still leaves businesses paying disproportionately high charges, particularly on widely used rewards cards.

According to NRF, swipe fees reached $111.2bn in the US last year, an increase from $100.8bn in 2023.

As per the settlement, the two card companies would reduce swipe fees, averaging 2.35% in 2024 and usually ranging between 2% and 2.5%, by 0.1% point over five years.

Reuters said that merchants would also be allowed flexibility over the categories of US-issued cards they accept, including premium consumer cards, business cards, as well as standard consumer cards.

The settlement includes an eight-year cap on standard consumer card rates at 1.25%, representing a decrease of over 25%.

Additionally, merchants would gain expanded rights to impose surcharges on card payments, with a court filing highlighting an “unfettered” ability to levy up to a 3% charge.

Economists Joseph Stiglitz and Keith Leffler, retained by merchant plaintiffs, estimated that halting the “upward spiral” in swipe fees is expected to save merchants $38bn by 2031.

The card firms did not admit any wrongdoing as part of the proposed resolution.

Brodie noted that the proposed fee reductions would not lower costs to the levels expected if there had been no antitrust breaches.

The judge described the projected $6bn in yearly savings for merchants as insignificant compared to the potential sums Visa and Mastercard could continue to collect.

Plaintiff merchants argue that the new settlement addresses these issues and continues to challenge “anti-steering” rules that limit their ability to guide customers toward lower-cost payment options.

Supporters of the revised accord include the Electronic Payments Coalition, comprising card networks and major banks such as Capital One, Bank of America, Chase and Citibank.