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Credit card fees 'civil conspiracy', class action lawsuit says

The B.C. Supreme court has certified a class action lawsuit brought by a Vancouver furniture retailer over credit card fees. Mary Watson says financial institutions rake in billions in credit card fees and some of those costs are passed on to the consumer.

A class action lawsuit alleging Canada's major banks and credit card companies are engaged in a "civil conspiracy" involving credit card fees, has been certified by the B.C. Supreme Court, allowing it to proceed.

The class action lawsuit  was filed by a Vancouver furniture retailer Mary Watson, who alleges the fees charged by 12 separate financial institutions, including Visa, Mastercard and Canada's big banks, "unlawfully interfered with the economic interests of merchants."

The suit says merchants are forced to accept every Visa or MasterCard presented by customers — including premium cards — even though merchants are charged much higher fees for those premium cards.

At the same time, merchants are not allowed to charge more for accepting them.

The lawsuit alleges that merchants are forced to raise prices for all customers to cover the cost of transactions with premium cards — fees that cost Canadian merchants billions each year.

In the court documents, Watson says she is seeking to recover the fees that the credit card companies and banks "have collected illegally from merchants."

The card companies charge a fee of 1.5 to three per cent of the total amount of the transaction each time a credit card is used. That can mean $15 in fees paid by the merchant when a customer charges a $500 purchase. The fee paid by a merchant for a debit transaction, on the other hand, is about 12 cents.

This lawsuit echoes arguments made by the Competition Bureau of Canada late last year, when it moved to strike down the rules companies impose on merchants that accept their credit cards.

The bureau said it was concerned the rules prohibit merchants from encouraging lower-cost forms of payment, such as debit and cash.

Under the current agreement, merchants cannot offer lower prices for non-credit card transactions.

In his 91-page decision certifying the class action lawsuit, B.C. Supreme court Chief Justice Robert Bauman dismissed the banks' claim that Watson hadn't demonstrated a "genuine controversy."

Bauman noted there have been several legal proceedings over credit card fees in Europe, Australia and the U.S.

"There certainly can be said to be a genuine controversy engaging the alleged anti-competitiveness of the 'Network Rules,' he wrote. "Indeed one might suggest, not cynically that the strength of the genuineness of the controversy joined by a plaintiff rises in direct proportion to the length of the defendant's submissions in these matters."

"On one particular day I counted 31 lawyers attending on behalf of their respective clients."

Last year in the U.S., Visa, MasterCard and the banks settled a similar class action lawsuit for $7 billion in what was described as the largest class action settlement in U.S. history.

Some major U.S. retailers including Target Corp. and Macy's Inc. pulled out of the out-of-court settlement saying it didn't pay them enough. They argued they were owed, and could get even more.