AmEx Loses Bid to Dismiss Currency Fee Lawsuit

Tuesday, 29 Mar 2011 03:58 PM

 

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American Express Co. lost its bid to dismiss an antitrust lawsuit accusing it of conspiring to fix foreign currency conversion fees and imposing arbitration clauses in cardholder agreements.

U.S. District Judge William Pauley in Manhattan Tuesday concluded that a jury could find that conduct by the credit card and travel services company "caused injury to competition in the credit card market."

The lawsuit is part of nearly seven years of litigation by consumers challenging the imposition by major credit card issuers of fees, usually 2 or 3 percent, on purchases made in currencies other than the U.S. dollar.

"We are very pleased with the outcome," said Charles Goodwin, a lawyer at Berger & Montague PC representing the plaintiffs. "The next step is a trial."

American Express spokeswoman Joanna Lambert said in an email that the company was "disappointed" with the decision and intends to continue to vigorously defend against the case.

Increased regulation of the U.S. credit card industry has made lenders more dependent on foreign exchange and other fees for revenue.

While a 2008 federal law restricted or eliminated some of these fees, it did not affect such currency fees.

Visa Inc and MasterCard Inc typically collect 1 percentage point of currency fees on their branded cards, with issuers collecting the rest.

In the American Express case, the plaintiffs accused the company of doubling its currency fee to 2 percent in 1999 after competitors had begun raising their fees, and after a meeting with some rivals to discuss issues facing the card industry.

Pauley wrote that a jury could reasonably infer that New York-based American Express and rivals had a "common design" to impose such fees, even if they did so at different times.

He also said consumers could still pursue antitrust claims over American Express' arbitration clauses, though some card issuers have agreed to remove such clauses for 3-1/2 years.

In December, American Express said it would get rid by the end of this month of currency fees for U.S. consumer and small business customers who use its Platinum or Centurion cards.

The Platinum card carries a $450 annual membership fee, according to American Express' website.

In afternoon trading, American Express shares were down 0.4 percent at $45.56 on the New York Stock Exchange.

The case is In re: Currency Conversion Fee Antitrust Litigation, U.S. District Court, Southern District of New York, No. MDL-1409.

© 2014 Thomson/Reuters. All rights reserved.

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