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Settlement has merchants unsure

About 80 percent of Lisa Ponzoli’s customers pay for their purchases with credit cards.

That means the owner of Babe, a boutique in Fells Point, pays about $500 a month in credit card “swipe” fees.

“A lot of consumers, when I’m checking them out … I ask if you want debit or credit, more often than not the consumer asks me what is cheaper for me,” Ponzoli said.

A proposed settlement reached July 13 in a long-running lawsuit between Visa and MasterCard, and some retail groups, might lessen the burden of fees on Ponzoli and other retailers — unless it doesn’t.

The credit card companies and banks agreed to pay retailers at least $6 billion to settle the lawsuit that alleged the card issuers conspired to fix the fees that stores pay to accept credit cards.

As part of the antitrust settlement, stores will be allowed to charge customers more if they pay using a credit card.

But at a time when shoppers increasingly are using credit and debit cards, merchants will face a dilemma: Whether to charge shoppers extra for using plastic, and if so, how to do so without angering them.

And while some have called the pact a major victory for merchants that could lead to banks lowering the fees they charge stores for customers’ credit card purchases, others aren’t celebrating.

“In this settlement there is really less there than meets the eye. It’s gotten a lot of headlines, but there’s very little substance of the settlement,” said J. Craig Shearman, a spokesman for the National Retail Federation.

Credit card companies have also agreed to reduce swipe fees for eight months. The temporary reprieve is valued at $1.2 billion. The settlement does not apply to debit cards.

The NRF estimates that credit card swipe fees cost retailers about $30 billion a year. Of that, at least $10 billion is an overcharge, Shearman said, noting that the proposed settlement is “just a drop in the bucket” and does not bring about transparency in credit card fees.

“Of the people we have heard from in the retail industry, we haven’t heard of anybody that said they support the agreement,” he said, adding that the NRF was not a party to the lawsuit.

The National Association of Convenience Stores, which was a party to the lawsuit, said it wouldn’t participate in the settlement, saying it offers too much to Visa and MasterCard and is unfair to merchants.

“It will still have Visa and MasterCard setting the fees so the banks don’t have to compete,” said Douglas Kantor, a lawyer for the group.

Peter Holland, a consumer protection attorney and law professor, said that even if credit card fees are lowered, merchants would now be allowed to pass them on to the consumer.

Holland, who directs the consumer protection clinic at the University of Maryland Francis King Carey School of Law, said that if the settlement goes through, consumers will need to be vigilant to see if they’re charged a fee.

“If history is any guide, that’s what’s going to happen,” he said.

The dispute between stores and banks dates to 2005. That’s when large retailers, including Kroger Co., Safeway Inc. and Walgreen Co. began filing price-fixing lawsuits against Visa, MasterCard and other banks.

The retailers claimed the credit card issuers worked together to fix the fees that stores pay to accept credit and debit cards. The fees, which vary depending on the type of store and the type of card issues, average about 2 percent of the price of a purchase.

Up until now, Visa and MasterCard have banned stores from charging customers who use credit cards more. Merchants, however, have been allowed to offer customers discounts if they pay with cash. Some gas stations do this, for example.

The Associated Press and Bloomberg contributed to this article.