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Visa and MasterCard made hundreds of millions of dollars by misleading consumers and charging them a hidden currency conversion fee every time they used their cards overseas, an Alameda County, Calif., court ruled Tuesday. The decision, by Judge Ronald Sabraw of Alameda County Superior Court, requires the companies to disclose the fee and to provide full restitution to consumers. The payout could put Visa and MasterCard on the hook for more than $800 million, according to the attorneys who brought the case. Tuesday’s decision by Judge Sabraw in Schwartz v. Visa International, 82404-4, upholds his proposed decision issued under seal in February. “In the context of credit cards, consumers expect that if fees are to be charged for the use of the card, those fees will be disclosed,” Sabraw wrote in a 125-page decision, which called Visa and MasterCard’s actions injurious to both consumers and competition. Allan Steyer, a San Francisco attorney who represented the plaintiff, said the decision was a great victory. “It’s our belief that the required disclosure going forward will benefit all cardholders,” said Steyer. A spokesperson for Visa did not return a call for comment. An attorney at Heller Ehrman White & McAuliffe, which is representing Visa, said that Visa’s currency conversion system provides great benefits to consumers. “We believe that Visa has acted fairly, in the interest of the consumer, and in keeping with disclosure requirements,” said Robert Mahnke, an attorney at Heller Ehrman. “We will appeal.” The case against the two credit card giants was filed in 2000 by Adam Schwartz, a California resident, as a representative action under � 17200 of the state’s Business and Professions Code. Schwartz was represented by a trio of firms that included San Francisco’s Steyer Lowenthal Boodrookas Alvarez & Smith, the San Diego office of Milberg Weiss Bershad Hynes & Lerach, and Schrag & Baum of Berkeley. According to the suit, Visa and MasterCard both charged cardholders a 1 percent currency conversion fee when they traveled abroad and purchased goods or services priced in foreign currencies. This fee was never disclosed to consumers in solicitations or in their monthly billing statements. Rather, the fee was “embedded” into the transaction amount listed on billing statements. “It was a designed, calculated operation,” said Milberg Weiss’ Christopher Burke. “It was taking a little bit of money from a lot of people over a long period of time.” According to evidence presented at trial, Visa collected approximately $816 million from U.S. cardholder transactions in foreign countries as a result of the fee between 1996 and March 30, 2002. MasterCard netted roughly $195 million from the fee between February 1996 and Dec. 31, 2000. “What weighs most strongly in the court’s consideration of the equities in this case is the intentional concealment by defendants of the currency conversion fee,” wrote Judge Sabraw. “Defendants strongly contest this finding by the court urging the court to strikes [sic] its findings of intentional concealment,” Sabraw continued. “The court will put it another way, that while the concealment of currency conversion fees by defendants was not malicious, it was also not inadvertent.” Foster City, Calif.-based Visa is liable to all its U.S. cardholders. Because MasterCard is based in New York, it is only required to refund its California cardholders. In the decision, Sabraw scheduled a hearing for May 23 to determine what form the restitution will take. The companies could automatically credit affected consumers in their billing statements, or they could devise a claims plan whereby consumers must come forward and apply for a reimbursement. The final amount of Visa and MasterCard’s damages will depend on what form this process takes. But based on the revenues Visa and MasterCard collected from the fees, plaintiffs’ attorneys said the sum will likely be in excess of $800 million. MasterCard is represented by Sheppard, Mullin, Richter & Hampton as well as New York’s Weil, Gotshal & Manges.

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