Magazine article American Banker

Deal Cost MasterCard $721M in 1Q

Magazine article American Banker

Deal Cost MasterCard $721M in 1Q

Article excerpt

MasterCard International's pretax expenses related to the settlement of the Wal-Mart case amounted to $721 million in the first quarter, the company said in a Thursday filing with the Securities and Exchange Commission.

MasterCard posted a net loss of $425.4 million for the quarter, down from a $53.6 million net profit in the year earlier quarter.

The company, based in Purchase, N.Y., said it must make its yearly $100 million installments on Dec. 22 except this year, when $10 million will be due by the end of this month and the remainder Dec. 22.

The after-tax hit to MasterCard will be $462 million. MasterCard agreed to a $1 billion settlement, along with several rule changes, right before the case, involving a dispute over debit card fees with a class of the nation's retailers, went to trial.

A MasterCard spokesman said the actual costs of going to trial were reported as part of MasterCard's normal expenses.

As part of the settlement, debit card issuers will have to reissue debit cards that have the word debit "or a similar term on the face" of the cards, and MasterCard must produce new in-store debit card signs.

Although issuers can reissue the cards as part of the normal reissuance cycles, 80% of all outstanding MasterCard-branded debit cards must carry the designation within 18 months of the settlement. All MasterCard debit cards must carry the debit name within 36 months.

In addition to the $1 billion settlement, MasterCard will pay merchants $25 million to compensate them for the time it takes MasterCard to implement the new interchange rates. …

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