Card Payments: Mastercard faces £14 billion class action lawsuit

April 29, 2019

2 min read

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What's going on here?

As a consequence of the Consumer Rights Act 2015, English solicitor Walter Merricks has revived a legal action against Mastercard that could pay 46 million UK citizens up to £300 each.

What does this mean?

In 2007, the European Commission (the EU’s legal arm) found that Mastercard had infringed EU law with illegal ‘interchange fees’ (or charges on businesses that accept Mastercard credit or debit). This led to over half a million businesses in the UK being overcharged. Consequently, Mastercard was embroiled in a legal battle with the European Commission until 2014. When Walter Merricks, a former financial ombudsman, tried to continue the lawsuit in 2017, the case was rejected by the Competition Appeal Tribunal (CAT). However, a dramatic turnaround has seen the UK’s largest ever class action case revived as the Court of Appeal has recently ordered the CAT to reconsider its decision. Merricks has reaffirmed that “there is no basis upon which Mastercard can contend that its legal fees were not unlawful”.

What's the big picture effect?

The Court of Appeal explained that the CAT had initially “demanded too much information” concerning how Mastercard’s fees were passed onto consumers. It ruled that the CAT had applied the wrong legal test and had misdirected itself regarding the payout of damages amongst the claimants.

This ruling is a landmark judgment for class action cases in the UK and is the first major test for the Consumer Rights Act 2015. The Consumer Rights Act means that all UK consumers who have suffered losses will now be part of a group of claimants, unless they explicitly opt-out of doing so. That’s why consumers will be automatically eligible for compensation if the claim is successful. Anyone over the age of 16, who was a UK resident for more than 3 months between 1992 and 2008 could claim compensation – so you may be part of the 46 million UK citizens who could get a payout.

In class action cases, the case generally needs to be led by an individual. In some instances, issues can arise when consumers fail to act (as happened in the well-publicised PPI scandal where successful claimants failed to claim their reward). In this case, Merricks has teamed up with law firm Quinn Emmanuel with funding from the litigation fund Innsworth, standing up on behalf of 46 million British consumers.

While Merricks may have won the battle, he has not yet won the war. Following the ruling, Mastercard responded that it “continues to disagree fundamentally with the basis of the claim.” Mastercard still maintains its innocence and has made clear that it will fight this case all the way to the Supreme Court if necessary.

The question now turns to whether Merricks can make the most of this ruling and successfully make a claim against Mastercard on behalf of 46 million British consumers.

Report written by Will H

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