American Express in a significant legal development, a U.S. judge ruled on Tuesday that debit card users across nearly a dozen states have the grounds to pursue class-action claims against American Express (AXP.N). The allegations revolve around accusations that the credit card giant inflated merchants’ fees on transactions, leading to consumers paying hundreds of millions of dollars in overcharges.

1. Class Certification for Debit Card Users

U.S. District Judge Nicholas Garaufis, based in Brooklyn, certified a class of debit card users, encompassing consumers in states such as Illinois, Ohio, North Carolina, and the District of Columbia. This pivotal decision opens the door for a collective legal action against American Express, specifically addressing concerns related to fees on debit card transactions.

2. Exclusion of Credit Card Users

However, Garaufis did not extend the class-action status to credit card users. The judge cited the complexities introduced by credit card reward programs and other variables, which resulted in too many differences among potential class members. This exclusion narrows the scope of the legal battle to focus on the specific issues surrounding debit card transactions.

3. Long-Running Litigation and Merchant Restraints

This ruling is part of an ongoing legal saga centered on rules that can restrict merchants from encouraging consumers to use certain cards, commonly known as “steering.” The plaintiffs, who primarily use Visa or Mastercard cards
raised concerns about the restraints imposed by American Express on merchants accepting their cards. The alleged restrictions purportedly led to higher prices for consumers at major retailers such as Ikea, Target, CVS
and Dick’s Sporting Goods.

4. Potential Overcharge Damages

An expert for the plaintiffs estimated overcharge damages for the proposed debit card class at more than $319 million in March 2023. This figure underlines the financial impact on consumers and the significance of the legal proceedings.

5. American Express Response

American Express declined to comment on the judge’s decision, maintaining a reserved stance in the ongoing litigation. The ruling does not address the merits of the plaintiffs’ claims, leaving room for further legal proceedings.

6. Implications for Future Proceedings

While the ruling by Garaufis is a crucial step towards a collective legal action
it does not guarantee the success of the plaintiffs’ claims. The court has yet to evaluate the merits of the case, and American Express may still contest and challenge the allegations.

As the legal battle unfolds, the outcome will likely have broader implications for how financial institutions manage fees and restrictions
shaping the landscape of consumer transactions.