MasterCard is facing a claim of up to £19bn in a landmark UK collective action over card charges that were passed on to shoppers. Lawyer and former head of the Financial Ombudsman Service, Walter Merricks CBE, explains what this may mean for you.
For years MasterCard defied UK and European competition watchdogs and set the transaction fees that they charge at excessive levels. So what, you may wonder? This sounds rather technical and nothing to do with me. You’d be wrong.
You and I – and virtually everyone – has lost out as a result, and I’m going to do something about it.
Mastercard interchange fees
Because retailers have to pay these interchange fees, they pass on the cost to consumers by raising their prices. The prices of everything we all bought from 1992 to 2008 –whether using a MasterCard or not – were higher than they should have been as a result of the unlawful fee-fixing of MasterCard.
Although most of us didn’t know this, experts who study the retail economy knew it was happening – and so did MasterCard.
Our estimate is that we’ve collectively lost out by about £19bn, possibly between £300 and £400 per consumer.
Until very recently, the chances of getting any kind of redress for this, as individuals, were almost zero. While the competition authorities have powers to stop detrimental practices, they don’t have any role in forcing offenders to surrender wrongful profits or making them pay compensation.
But the recent Consumer Rights Act that came into force last year, hugely supported by Which?, has allowed for legal actions to get collective redress for a whole class of consumers who’ve lost out as a result of anti-competitive conduct.
When I was head of the Financial Ombudsman Service, I had to handle a large number of ‘single issue’ mis-selling scandals that affected masses of consumers. These included mortgage endowments, bank default charges and PPI. I was frustrated that there was no means of dealing with these collectively, and we had to handle each complaint individually.
My aim is to use the new collective action to get the redress to which UK consumers are entitled and to ensure that MasterCard cannot hold on to the illegal profits it made.
The great thing about this collective approach is that no one has to take any action to be part of the claim. I’ll be fighting the case against MasterCard on behalf of all UK consumers, so nobody needs to file an individual claim or complaint.
And if and when we win compensation, I’m determined to ensure, so far as I possibly can, that the claims companies who hijacked the PPI compensation process don’t get a look in this time, and that the process for claiming a share of the compensation is as straightforward as possible.
This is a guest post by Walter Merricks CBE, a lawyer and former Chief Ombudsman of the Financial Ombudsman Service. All opinions are Walter’s own, not necessarily those of Which?