By Andrew R. Johnson Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Credit-card swipe fees paid by merchants would likely be cut temporarily under a potential settlement of numerous retailer lawsuits against Visa Inc. (V), MasterCard Inc. (MA) and several large banks. "This cut could be roughly 33% and may last approximately one year," Jason Kupferberg, analyst with Jefferies Group Inc., wrote in a research note Tuesday. The fees, known as interchange, are set by Visa and MasterCard, which process transactions, but collected by the banks that issue their plastic cards, including Bank of America Corp. (BAC), J.P. Morgan Chase & Co. (JPM) and Citigroup Inc. (C). Big banks are already grappling with major cuts to debit-card interchange that took effect in October per provisions in 2010's Dodd-Frank Act. The provisions are estimated to reduce revenue for large banks by more than $6 billion annually, according to industry estimates. A reduction in credit-card swipe fees would likely be included in any settlement of litigation many retailers and merchant trade groups have filed against Visa, MasterCard and their partner banks, according to Kupferberg. Since 2005, merchants including Kroger Co. (KR), Payless ShoeSource and Safeway Inc. (SWY) have filed more than 50 lawsuits accusing the companies of price-fixing. A trial date for the cases, which have been consolidated in U.S. District Court for the Eastern District of New York, has been set for September 2012, but analysts have speculated a settlement is likely to occur before then. Visa and MasterCard didn't immediately respond to requests for comment on Tuesday. Kupferberg estimates a potential settlement could cost $5 billion to $15 billion based on industry checks, calling the amount a "very tolerable outcome" for Visa and MasterCard. Visa last month said it was setting aside $1.6 billion on top of an "uncommitted balance" of $2.7 billion already deposited into a litigation escrow primarily to resolve the merchant litigation, according to filings with the Securities and Exchange Commission. If a settlement is reached, Visa would be responsible for about 67% of the amount and MasterCard would be responsible for about 33%, according to an agreement the companies have outlined in filings. Under a separate agreement MasterCard has with some of its partner banks, its financial exposure would be limited to 12% of the total amount. Visa, which as part of its 2008 initial public offering established a separate class of shares held exclusively by U.S. banks tied to its litigation escrow, would be "unscathed from a financial perspective," Kupferberg wrote. Visa's shares were up 0.8% at $101.58 and MasterCard's shares were up 1.7% at $344.73 in recent trading. --By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; andrew.r.johnson@dowjones.com
