The state of West Virginia has reached a settlement with Visa USA and MasterCard International, requiring the credit card companies to set aside $12.1 million to provide tax relief in the form of a sales tax moratorium for West Virginia citizens.
In October 2003, Attorney General Darrell McGraw filed suit against Visa and MasterCard, charging the companies with violations of West Virginia's antitrust and consumer protection laws. The state sought restitution and civil penalties on behalf of West Virginia consumers.
McGraw alleged that Visa and MasterCard employed illegal business practices that increased the cost of doing business for merchants accepting Visa's and MasterCard's credit and debit cards, which costs were passed on to consumers.
Many merchants that accepted Visa's and MasterCard's credit cards were forced to also accept the debit cards, the suit charged.
The merchants were charged the same fee for the credit cards and debit cards although the costs and risks associated with the credit cards were far greater than for the debit cards. The state alleged that the increased costs were passed on to consumers by increasing the cost of virtually every retail product.
A similar suit was brought by Target, Sears, Wal-Mart and others in 1996, alleging similar charges but seeking damages on behalf of merchants. That suit settled in 2003.
McGraw said West Virginia is the first state to win restitution for its consumers from the credit card companies.
"This has been a long time coming and involved the devotion of a lot of time and resources. I hope that the settlement clips the wings of anyone embarking on a course of illegal conduct in West Virginia," McGraw said.
The tax relief provided under the terms of the settlement agreement requires legislation, and the mechanics of the type, amount and length of time that the tax moratorium will be provided to West Virginia consumers is dependent upon the West Virginia legislature, McGraw said.
