The Mastercard £19 Billion Class Action at the UK Competition Appeal Tribunal (CAT)

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Mastercard Class Action

Lessons Learned: Civil Litigation Against Banks

1. Class Actions Are a Vital Tool—but Their Limits Are Clear.

The Mastercard CAT case demonstrated that mass claims can get off the ground—something unthinkable 10 years ago—but also that proving causation, pass-on, and quantum remains a technical minefield. Even with a binding infringement decision (the EU ruling against Mastercard), Merricks’ team struggled to translate illegality into meaningful compensation. In the end, years of litigation produced a fraction of the claimed damages.

Lesson: Collective redress is now structurally possible, but economic complexity and legal proceduralism still favour big banks and financial institutions. Cases can be drawn out, narrowed, and settled on terms that feel like symbolic justice at best.

2. The Deep Pocket Advantage Is Alive and Well.

Mastercard (and by extension, the banks embedded in the payments ecosystem) used resources, delay tactics, and superior legal firepower to exhaust their opponents. Even the litigation funder—a seasoned player—ended up fighting its own client, Walter Merricks, over the eventual settlement.

Lesson: No matter the merits, civil litigation is a long game that can sap claimants of resolve, funding, and focus. Banks and financial institutions have the upper hand in terms of durability and adaptability in legal warfare.

3. Proving Systemic Harm Is Inherently Difficult.

The article below rightly notes that banks are adept at constructing legal deniability. The Mastercard case hinged on whether unlawful EEA fees influenced UK fees—a technical question buried deep in policy and economics. Similarly, in SME abuse or lending scandals (like HBOS Reading), proving a causal chain between systemic decisions and individual harm is arduous.

Lesson: The same problem persists across both competition and misconduct cases: diffuse harm is hard to tie back to centralised, culpable decision-making. Banks benefit from fragmented structures and “plausible deniability.”

Should We Bother?

This is the heart of our question—and I would frame the answer in two ways:

Yes, We Should—But Smarter.

  • Strategic Litigation: Civil action should target cases with the clearest evidence of direct harm, where causation is less likely to be contested into oblivion. For example, focusing on clear instances of fraud or mis-selling with documented victim losses rather than sprawling systemic abuses alone.
  • Parallel Pressure: Litigation should be just one pillar. Simultaneous media exposure, regulatory complaints, political lobbying, and public mobilisation can amplify the impact of legal action and maintain momentum.
  • Coalition Building: Mass cases require not just legal acumen but community solidarity. The Mastercard case’s greatest success might be its mobilisation of public interest—even if payouts were meagre. Empowering SMEs, consumers, and whistleblowers to stay united post-judgment is critical.
  • Smaller, Tactical Cases: We might learn from the way environmental activists pursue smaller, winnable claims that build legal precedent. This chips away at corporate power incrementally rather than trying to land one huge blow.

But We Must Also Be Realistic.

As our previous article trenchantly points out, the ECCTA only moves the needle to “quite difficult.” Similarly, the civil system still operates on banks’ terms: costly, slow, and complex. The Mastercard case—and the structural power of banks—show that without seismic reform (like reversing the burden of proof in systemic fraud cases, or introducing strict liability), we face uphill battles.

The Bigger Picture: Changing the Playing Field

Rather than solely relying on civil litigation, our article’s call for coroner-led inquests, criminal manslaughter charges, and regulatory overhaul signals the right path. Litigation should not be a substitute for robust public enforcement. Indeed, civil suits often become the only route because regulators fail.

Strategic priority areas:

  • Push for binding, independent public inquiries (similar to the Post Office scandal) that can force open what litigation cannot.
  • Advocate for legislative change that reduces the evidentiary burden in cases of gross negligence and systemic abuse.
  • Support a reimagined ombudsman or compensation scheme that deals with mass harm swiftly and decisively.

Final Thought

To our question: Should we bother? My answer is this:

We must—but on our own terms. Civil courts can deliver moments of justice but will rarely be transformative alone. The Mastercard case showed what’s possible—and also, what’s insufficient. We need a hybrid strategy: legal action as pressure points, combined with political, cultural, and systemic reform.

Or put more bluntly: keep fighting, but don’t put all your faith in the courtroom to deliver what the system is designed to avoid.

Mastercard: A Landmark Consumer Claim

In 2016, former UK Financial Ombudsman Walter Merricks CBE filed a groundbreaking opt-out class action against Mastercard on behalf of virtually all UK consumers – a class initially estimated at 46 million people [lawgazette.co.uk]. The claim sought an enormous £14–19 billion in damages (including interest) [reuters.comlawgazette.co.uk], making it the largest proposed class action in British history. The case, Merricks v. Mastercard, alleges that Mastercard’s interchange fees – charges levied on every card transaction – were set at unlawfully high levels between 1992 and 2008, and that these overcharges were passed on to consumers in the form of higher prices for goods and services [fintechfutures.comreuters.com]. In essence, Merricks claims UK shoppers paid a hidden “invisible tax” due to Mastercard’s fees [reuters.com].

This mass consumer claim is a follow-on action: it builds on a 2007 European Commission decision (upheld by the EU courts in 2014) finding that Mastercard’s multilateral interchange fees (MIFs) violated competition law [milbank.commilbank.com]. Armed with that infringement finding, Merricks’ class action seeks to recover damages under the new collective proceedings regime introduced by the Consumer Rights Act 2015. It is the first opt-out collective lawsuit certified in the UK for antitrust violations [reuters.com], heralded as a “revolution in English law” for enabling consumers with small individual losses to band together [reuters.comreuters.com].

Magnitude of the Case: The proposed class covers anyone resident in the UK between May 1992 and June 2008 who purchased from a business accepting Mastercard – even if they never paid with a Mastercard themselves [kennedyslaw.comkennedyslaw.com]. This sweeping definition (all UK consumers of working age during the period) led to an estimated 45+ million claimants [judiciary.ukkennedyslaw.com]. The aggregate damages were originally calculated at around £14 billion (plus interest, bringing it towards £17–19 billion) [lawgazette.co.ukreuters.com] – roughly £300 per person on average [reuters.com]. By any measure, it is a gargantuan claim, described by the Tribunal itself as such [catribunal.org.uk].

Key Players: Walter Merricks (a solicitor and former Chief Ombudsman of the Financial Ombudsman Service) serves as the Class Representative, positioning himself as a champion for consumers. He is advised by U.S.-based law firm Quinn Emanuel Urquhart & Sullivan, known for plaintiff-side litigation [reuters.com]. The class action is backed by a litigation funder, Innsworth Capital, which financed the case in return for a share of any recovery [milbank.com]. On the defense side is Mastercard, which has vigorously fought the claim at every turn – at one point deriding it as driven by “hit and hope” U.S. lawyers [reuters.com]. Mastercard’s legal team has included leading barristers and global firms (reports indicate Jones Day represented Mastercard in the tribunal proceedings [catribunal.org.uk]). The Tribunal itself (the CAT) and higher courts have played a pivotal role in scrutinizing the case’s viability, as detailed below.

The Original Claims and Allegations

At the heart of Merricks v. Mastercard is the allegation that Mastercard’s default multilateral interchange fees (MIFs) were set at an illegal, anti-competitive level and inflated prices for UK consumers. Interchange fees are charges that a cardholder’s bank (the issuing bank) imposes on a merchant’s bank (the acquiring bank) every time a consumer uses a credit or debit card [milbank.com]. During 1992–2008, Mastercard set cross-border interchange fees for transactions within the EEA (European Economic Area) that the European Commission later found to breach competition law [milbank.com]. Merricks’ claim argues two key points:

  • Domestic Impact of Illegal Fees: The unlawful EEA interchange fees acted as a benchmark that raised the level of UK domestic interchange fees on Mastercard transactions [milbank.com]. In other words, even transactions within the UK (which comprised ~95% of the claim’s value) were higher because they were influenced by the inflated cross-border fees [milbank.com]. This “umbrella” effect of the EEA fees on UK fees is a critical causal link the claim needed to establish.
  • Pass-Through to Consumers: Merricks contends that the inflated MIFs were passed through at each level of the payment chain – acquiring banks passed the costs on to merchants via the merchant service charge (MSC), and merchants in turn passed on the cost to consumers through higher retail prices [judiciary.ukreuters.com]. Thus, even consumers paying cash or using other cards allegedly paid higher prices on all purchases at Mastercard-accepting businesses. The class action seeks an aggregate damages award to compensate this diffuse harm to consumers across the economy.

These claims raise complex legal and economic issues. The case is a follow-on action (liability is predicated on the EU’s finding of illegality), but quantifying damages and attributing them to UK consumers involves heavy economic analysis. Key issues included: the counterfactual scenario (what interchange fee would have prevailed absent Mastercard’s breach), the degree of pass-on at the merchant and bank level, how to distribute any aggregate award to millions of individuals, and various legal defenses like limitations and exemptions.

Mastercard has consistently disputed the claims. It argues that UK domestic interchange fees were set independently of the EEA fees (hence no causation), that much of any overcharge was not passed to consumers, and that distributing compensation to tens of millions (many of whom suffered only a few pounds of loss) is inherently unmanageable or unjust. Indeed, at the case’s outset Mastercard noted similar consumer class cases had failed elsewhere and characterized this claim as speculative [fintechfutures.com]. These debates framed the protracted legal battle outlined next.

Procedural History: From Rejection to Revival

Initial CAT Refusal (2017): The Merricks class action’s journey was turbulent. In July 2017, the Competition Appeal Tribunal refused to certify the case at the first hurdle, rejecting Merricks’ application for a Collective Proceedings Order (CPO). The CAT was not satisfied that the claims were suitable for collective treatment – citing concerns about the “pass-on” evidence and the plan for distributing damages to consumers [fintechfutures.comfintechfutures.com]. Effectively, the Tribunal found the case too complex and novel, halting the £14 billion lawsuit at inception. Headlines declared that Mastercard had triumphed in fending off the claim [fintechfutures.com].

Appeal and Supreme Court (2019–2020): Merricks appealed this decision, sparking a landmark legal debate about the threshold for class certification in the new regime. In April 2019, the Court of Appeal overturned the CAT’s refusal and held that Merricks’ case should be allowed to proceed [kennedyslaw.com]. Mastercard then appealed to the UK Supreme Court. In December 2020, the Supreme Court delivered a landmark judgment in Merricks’ favor, dismissing Mastercard’s appeal [kennedyslaw.comkennedyslaw.com]. The Supreme Court clarified that the CAT had set the bar for certification too high: at the CPO stage, it is not necessary to have a full distribution mechanism or precise loss calculations for each class member – the tribunal should focus on the suitability of claims for collective proceedings, not demand granular proof of individual loss [kennedyslaw.comkennedyslaw.com]. This ruling “opened the door” to opt-out class actions in the UK [slaughterandmay.com], establishing a more claimant-friendly approach. The case was remitted to the CAT for re-consideration under the correct test [kennedyslaw.com].

Certification and Preliminary Issues (2021–2022): Back at the CAT, Mastercard did not contest Merricks’ eligibility to represent the class (given the Supreme Court guidance) [gibsondunn.com]. In a judgment of 18 August 2021, the CAT formally certified the Merricks case – the first opt-out competition CPO in UK history [mastercardconsumerclaim.co.uk]. The Tribunal also decided that deceased persons could remain in the class (allowing estates of those who died since 2016 to claim) [mastercardconsumerclaim.co.uk], a novel issue in itself. With the class action officially underway, case management moved to substantive questions. The CAT split the proceedings into issues to be tried in stages [mastercardconsumerclaim.co.uk]. In January 2023, a hearing on various preliminary issues was held, covering points like whether Mastercard could argue an alternative lawful fee (exemptibility), which law applied to certain transactions, and limitation periods [mastercardconsumerclaim.co.uk]. The Tribunal’s ruling in March 2023 largely favored Merricks on points of law – it barred Mastercard from asserting an “exemptible” fee as a defense (since the EU decision was binding) and confirmed the applicable law in Merricks’ favor, though it sided with Mastercard on some limitation arguments (time-barring claims before certain dates) [mastercardconsumerclaim.co.ukmastercardconsumerclaim.co.uk]. Both sides filed appeals on these issues, but in May 2024 the Court of Appeal upheld the CAT’s decisions (refusing further appeals) [mastercardconsumerclaim.co.uk].

Causation Trial (2023): A major chunk of the case – the contested causal link between EEA fees and UK domestic fees, and the “value of commerce” affected – went to trial in the CAT in July 2023 (a multi-week hearing). This was essentially “Phase 1” of determining Merricks’ claim on the merits. The Tribunal examined extensive evidence on how Mastercard’s UK interchange fees were set in the 1990s and 2000s, including historical documents and economic expert testimony [catribunal.org.ukcatribunal.org.uk]. Mastercard’s defense was that its EEA cross-border MIF (the one condemned by the EU) did not actually drive or influence the level of UK domestic MIFs – because during much of the period, UK fees were determined by other means (bilateral agreements among banks or separate domestic arrangements). In a detailed judgment on 26 February 2024, the CAT delivered a mixed outcome:

  • The Tribunal found against Merricks on the core causation point. It concluded that, as a factual matter, the unlawful EEA MIF had no significant causative effect on UK interchange fees [milbank.commilbank.com]. This was a serious blow: roughly 95% of the claim’s value depended on showing UK fees were higher due to the EEA benchmark, and the Tribunal was not convinced by Merricks’ evidence on this point [milbank.com]. In effect, the CAT held that UK domestic MIFs were set at levels that did not depend on the EEA MIF – breaking the chain of causation for most of the damages.
  • However, Merricks prevailed on some important sub-issues. Notably, the Tribunal accepted that Mastercard’s interchange fees applied by default in the UK unless bilateral agreements were in place [mastercardconsumerclaim.co.uk] – a point that could have implications for liability. It also agreed that even “on-us” transactions (where the same bank is both issuer and acquirer) carried an interchange fee internally, contrary to Mastercard’s argument [mastercardconsumerclaim.co.uk]. These findings slightly expanded the volume of commerce potentially affected (e.g. including on-us transactions, about 18% extra volume) [mastercardconsumerclaim.co.uk]. The CAT further found that Mastercard had not set its fees based on objective cost studies (undermining one pillar of Mastercard’s defense) [mastercardconsumerclaim.co.uk].

On balance, the Causation Judgment sharply reduced the claim’s scope. Merricks was “disappointed” with the finding of no causal link and sought to appeal it [mastercardconsumerclaim.co.uk], but the Court of Appeal refused permission [mastercardconsumerclaim.co.uk]. As a result, by early 2024 the claim’s value was a fraction of its former £14–19bn scale. The class size also shrank slightly – claims before mid-1997 were cut off for most UK jurisdictions due to limitation (eliminating about 2 million class members and some £2 billion of claim) [milbank.commilbank.com]. Merricks even withdrew parts of the claim (e.g. dropping Mastercard debit and Solo card transactions) that were complicating the case [milbank.com]. In the Tribunal’s words, the case had proven to be “gargantuan” [catribunal.org.uk], but a series of rulings in 2023/24 whittled it down considerably.

Pass-On Issues and Merchant Cases: One remaining hurdle was the question of “pass-on” – i.e. how much of the overcharge was passed to merchants and then to consumers. Uniquely, the CAT coordinated this aspect with parallel merchant lawsuits against Mastercard and Visa. Hundreds of UK merchants (from supermarkets to small businesses) have their own claims seeking damages for interchange fees they paid – often referred to as the “Merchant Interchange Fee” litigation [mastercardconsumerclaim.co.uk]. The Tribunal decided to hear evidence on pass-on in a coordinated way to avoid inconsistent findings [mastercardconsumerclaim.co.ukmastercardconsumerclaim.co.uk]. A trial on Merchant Pass-on (did merchants raise prices to cover fees?) was held in late 2024, and a trial on Acquirer Pass-on (did banks pass fees to merchants via the MSC?) was scheduled for spring 2025 [mastercardconsumerclaim.co.uk]. Merricks’ consumer case was poised to plug into these findings, since his claim depended on establishing that both levels of pass-through occurred [judiciary.uk]. In practical terms, acquiring banks (the likes of RBS, Barclays, HSBC, Lloyds, etc.) would have passed the illegal fees to merchants by charging higher merchant service charges, and those merchants then passed costs to consumers [judiciary.uk]. These issues, however, ultimately became moot due to the case’s abrupt resolution.

Collapse and Settlement of the Case

After nearly nine years of litigation, the Merricks v Mastercard saga reached an unexpected and somewhat anti-climactic end. Facing the CAT’s unfavorable causation ruling and the prospect of lengthy further trials on pass-on and quantum, the parties struck a deal. On 3 December 2024, Walter Merricks and Mastercard announced a proposed settlement of the collective action, without any admission of liability by Mastercard [milbank.commilbank.com]. Under the settlement, Mastercard agreed to pay £200 million in total to resolve the claims [milbank.com]. This figure – a tiny fraction of the £17–19bn originally claimed – represented the compromise both sides reached in light of the litigation risks.

The £200m sum, if approved, would be used to pay out compensation to class members and cover legal fees and the funder’s cut. According to a joint application filed with the CAT, the distribution proposal included: £100 million to be distributed directly to consumers (on a per capita basis for those who submit claims, roughly £300 per claimant minus fees) and up to £45 million for the litigation funder (Innsworth) as its return, with any remainder possibly boosting consumer payouts [milbank.commilbank.com]. Notably, unclaimed funds (if consumers fail to claim their share) would not revert to Mastercard; Merricks proposed they be given to a charity or otherwise applied for the class’s benefit, per the collective proceedings rules.

However, the settlement’s path was not smooth. The litigation funder objected strenuously – a highly unusual turn of events. Innsworth Capital, which had bankrolled Merricks’ case for years on the expectation of a much larger recovery, argued the £200m deal was “premature” and too low [lawsociety.ie]. In late 2024, Innsworth even initiated an arbitration claim against Merricks, alleging he breached their funding agreement by settling without the funder’s consent [milbank.commilbank.com]. The dispute became public, and Mastercard agreed to indemnify Merricks with £10 million in legal costs to fight the funder’s action [milbank.com] – an ironic scenario of the defendant funding the class representative’s battle against his own funder. Innsworth also sought to formally intervene in the CAT to block or alter the settlement [milbank.com].

Despite this drama, in February 2025 the Competition Appeal Tribunal approved the settlement [milbank.com]. After a three-day hearing, the CAT was satisfied that the opt-out settlement was “just and reasonable” as required by law. It issued an order authorizing the settlement (with reasons to follow in writing) [milbank.com]. The Tribunal did, however, reserve certain issues – particularly how the £200m should be distributed – for further consideration [milbank.com]. The CAT indicated it would decide the final distribution method and the funder’s entitlement in a subsequent judgment [milbank.com]. Essentially, the Tribunal approved the deal in principle, ensuring that UK consumers will get compensation, but left open the contentious question of the funder’s payout vs. consumer recovery (which had fueled the dispute). As of the latest reports, the detailed judgment on distribution is expected in spring 2025 [milbank.com].

This outcome marks an apparent collapse of the once-colossal case. A claim valued at nearly £19 billion – touted as the poster-child for UK class actions – ended in a settlement roughly 1% of its putative value. If one assumes ~44 million eligible consumers [milbank.com], the £100m consumer compensation portion would equate to only about £2 per person (though in practice those who claim might receive a ~£30–£45 payment, since not everyone will claim and some funds cover costs) [milbank.com]. Even Merricks acknowledged the result “achieved less than we hoped for” [lawgazette.co.uk]. The case’s collapse was driven by the difficulties in proving the full chain of causation and pass-on. Once the CAT found the domestic fees weren’t causally inflated by the illegal fees, the bulk of damages evaporated [milbank.com]. Rather than continue a risky, years-long litigation for a diminished reward, the class representative chose a guaranteed (if modest) payout to consumers.

From Mastercard’s perspective, the settlement at this fraction of the claim is a major victory – indeed, Mastercard’s total payout (£200m) is less than 1.5% of one year’s net income (the company reported $9+ billion profit in 2022). It also avoids the specter of an adverse judgment and further precedent for class actions. For the UK legal system, the Merricks case still set important precedents (on class certification and settlement approval), but it did not culminate in the dramatic judgment many anticipated. The conclusion underscores that even with a new collective regime, economic reality can constrain mass claims – complex antitrust damages may not always translate into consumer compensation at scale.

Lloyds Banking Group’s Connection to the Case

Is Lloyds Banking Group involved in Merricks v Mastercard? Not as a named party – the lawsuit targeted Mastercard as the defendant. However, Lloyds and other major banks are deeply embedded in the factual backdrop of the case. The alleged overcharges stem from the Mastercard interchange fee system, in which banks played a key role. In fact, Lloyds Bank was one of the major UK banks benefiting from Mastercard’s interchange fees during the claim period, both as a card issuer and as a merchant acquirer:

  • Historical Role in UK Card Schemes: Lloyds (then known as Lloyds TSB) was a founding member of the UK’s domestic credit card network. Before 1989, British banks operated the “Access” card scheme (a rival to Barclays’ Visa cards). Lloyds, along with NatWest, Midland (HSBC), and RBS, owned the Joint Credit Card Company (JCCC) which ran the Access card system [catribunal.org.uk]. Access cards were co-branded with Mastercard/Eurocard for international use [catribunal.org.uk]. In 1989, as Mastercard and Visa opened their networks, Lloyds and the other Access banks became Mastercard licensees and began issuing Mastercard-branded credit cards (phasing out Access) [catribunal.org.uk]. Lloyds was actually the first UK bank to offer dual Visa/Mastercard services by the late 1980s [catribunal.org.uk]. This history, recounted in the tribunal evidence, shows Lloyds was at the forefront of expanding Mastercard’s presence in the UK. Post-1989, multiple banks (including Lloyds) started both issuing Mastercard cards and acquiring transactions, necessitating the introduction of UK domestic interchange fees for the first time [catribunal.org.ukcatribunal.org.uk]. Thus, Lloyds helped create the very domestic MIF arrangements whose level was later in dispute.
  • Major Acquiring Bank: Lloyds was also a significant merchant acquirer – the bank that processes card payments for retailers. Evidence in the CAT proceedings showed that by the late 1990s, the UK acquiring market was highly concentrated among a handful of banks. The five largest acquirers – NatWest, Barclays, Midland (HSBC), Lloyds, and RBS – together held close to 100% of the acquiring market in 1997, with the top three taking about 90% of transaction volume [catribunal.org.uk]. In other words, Lloyds was one of the dominant players handling card payments for merchants. This matters because the merchant service charge that acquirers charged retailers included the interchange fee. Merricks’ claim explicitly asserts that acquiring banks (like Lloyds) passed on the full interchange fee to merchants in their charges [judiciary.uk]. If that pass-through was 100%, any illegal inflation in interchange directly raised merchant costs by the same amount. (The CAT’s later pass-on trial was examining just how much acquirers passed through or absorbed interchange – a question relevant to Lloyds’ conduct, though results were not finalized before settlement [mastercardconsumerclaim.co.uk].)
  • Issuer Benefits: As one of Britain’s largest card issuers, Lloyds stood to collect interchange fees on every Mastercard (and Visa) transaction made by its cardholders. These fees (set by Mastercard’s rules) flow from the merchant’s bank to the cardholder’s bank. So during 1992–2008, if interchange fees were higher than competitive levels, issuers like Lloyds profited from that margin. Merricks’ lawsuit can thus be seen as indirectly challenging a revenue stream of issuing banks. However, the legal cause of action was against the scheme (Mastercard) coordinating the fees, rather than suing each bank. Notably, UK banks including Lloyds have pursued their own litigation against Mastercard and Visa in other contexts – for example, some issuing banks sued Visa/Mastercard for alleged loss of interchange when certain fees were capped, illustrating how intertwined the schemes and banks are in these battles (though those cases are separate).

In sum, Lloyds Banking Group is not directly on trial in the Merricks case, but it is part of the ecosystem under scrutiny. The case revealed insights into how banks like Lloyds operated within the Mastercard network. For instance, tribunal findings noted that Lloyds and other banks often had bilateral interchange agreements among themselves in the 1990s, setting specific fee rates for transactions between their cards and terminals [catribunal.org.uk]. The prevalence of such bilateral deals versus default fees was central to determining if Mastercard’s set fees influenced the market. Lloyds was also mentioned as a pioneer of certain card products (like early dual-purpose cards and American Express companion cards) in evidence about payment system rules [catribunal.org.ukcatribunal.org.uk] – tangential but showing the bank’s significant presence in UK card services.

Importantly, the Merricks case’s theory of harm encompasses systemic practices that involve banks. The allegation that acquiring banks passed on overcharges to merchants and then consumers is essentially a claim about industry-wide conduct [judiciary.uk]. If it had gone to full trial, the spotlight would likely have fallen on the pricing practices of acquirers (such as Lloyds Cardnet, Lloyds’ acquiring arm) and how merchants set retail prices. Indeed, in the parallel merchant interchange litigation, claimants have argued that banks colluded on or uniformly adopted interchange fees in the MSC rates – effectively a form of overcharging merchants. So while Mastercard was the formal defendant, the case implicitly put a question mark over UK banks’ treatment of SMEs and retailers in the payment chain.

Wider Implications and Systemic Issues in UK Financial Regulation

The Mastercard class action highlights broader systemic issues in UK financial regulation and enforcement, especially when contrasted with other scandals involving major banks like Lloyds:

  • Collective Redress vs. Regulatory Action: The Merricks case shows a new route for consumers to seek redress via the courts, filling a gap where regulators didn’t (or couldn’t) secure compensation. The Competition Authorities (EU and UK) fined Mastercard for its fees, but no compensation was paid to consumers absent this lawsuit. Traditionally, millions of consumers suffering small losses (pennies on each purchase) had no practical means to recover their money – a classic “collective action problem.” The introduction of the opt-out class action regime in 2015 was meant to address exactly these scenarios [kennedyslaw.comreuters.com]. By 2020’s Supreme Court ruling, that regime was confirmed to have real teeth [kennedyslaw.com]. This stands in contrast to other areas of finance (outside competition law) where collective redress is still lacking. For example, the UK has seen massive mis-selling scandals (like Payment Protection Insurance, or interest rate swaps for SMEs) resolved largely through regulatory pressure and bank-led compensation schemes, not through class litigation. The Mastercard case therefore is a bellwether for consumer empowerment in the UK – albeit one that ended with modest returns.
  • Regulatory Oversight and Bank Misconduct: The question mentions “lending or payments misconduct, SME abuse, or FCA/FOS oversight failures.” Indeed, the UK banking sector – including Lloyds Banking Group – has been rocked by a series of misconduct scandals over the past two decades. A pertinent example is the HBOS Reading fraud (involving Halifax Bank of Scotland, later acquired by Lloyds). In the early 2000s, corrupt HBOS bankers and consultants defrauded small business customers, causing over £245m in losses; the crime was only prosecuted years later, and Lloyds’ handling of compensation was widely criticized [reuters.com]. The FCA fined Lloyds’ Bank of Scotland unit £45.5m for failing to disclose the fraud for years [theguardian.com]. Victims waited nearly a decade for redress, and a compensation scheme set up in 2017 was slammed by lawmakers as too slow and ungenerous [reuters.com]. This case exemplifies “SME abuse” and oversight failure – banks mistreating customers, and regulators/ombudsman struggling to respond swiftly. The parallels to Merricks are indirect but thought-provoking: in both situations, a large institution’s practices (Mastercard’s fees; HBOS/Lloyds’ lending misconduct) imposed widespread harm. In the HBOS case, the resolution relied on belated regulatory and legal action (criminal trials, an FCA fine, and an out-of-court compensation review) [reuters.comreuters.com]. In Merricks, it fell to a private legal action to seek compensation for consumers, because neither the FCA nor any other body could compel refunds for the “invisible” overcharge. Walter Merricks’ own background as the former Financial Ombudsman lends irony: the FOS handles individual consumer disputes, but something like industry-wide price inflation by a card scheme is beyond its remit. Merricks once oversaw an ombudsman service dealing with countless complaints against banks like Lloyds; now he took up the mantle through the courts, arguably to achieve what regulators or ombudsmen could not easily do – deliver a form of collective justice for consumers.
  • Payments System Regulation: Another angle is the role of the Payment Systems Regulator (PSR) and competition authorities in policing the card industry. While the Merricks case was underway, there were continued concerns about high card fees. (Notably, post-Brexit, Mastercard and Visa raised certain cross-border fees on UK-EU transactions, prompting the PSR to consider caps [paymentexpert.comuk.finance.yahoo.com].) This illustrates that ensuring fair payment practices is an ongoing challenge. The CAT proceedings exposed how interchange fees were set through a combination of network rules and collective agreement among banks (via bodies like the Mastercard UK Members Forum) [catribunal.org.ukcatribunal.org.uk]. Such arrangements can be pro-competitive or anti-competitive, and only robust regulatory oversight or litigation keeps them in check. In the Mastercard case, it ultimately took an EU enforcement action and then a UK class action to scrutinize and address the issue – showing that traditional UK regulatory mechanisms (OFT/Competition Commission or FCA) had not delivered consumer compensation for years of anti-competitive fees.
  • Financial Redress and Culture: The outcome of Merricks v Mastercard – a relatively small settlement – raises questions about the effectiveness of enforcement. It highlights that even when wrongdoing is identified, getting money back to consumers is difficult. This resonates with critiques in other areas: for instance, banks including Lloyds were forced to refund billions for PPI mis-selling, but only after a long campaign and FCA intervention. In SME scandals, many victims feel justice was delayed or denied. The UK has been accused of a “light touch” approach historically, and efforts to “restore the rule of law” in financial services have been ongoing [assets.publishing.service.gov.uk]. The Merricks case shows both progress (in enabling collective redress) and the persistent imbalance of resources – as seen when a funded claim encounters years of procedural fighting by a deep-pocketed defendant.

In conclusion, the Mastercard CAT case is a study in both the promise and limitations of the UK’s response to large-scale financial wrongdoing. It broke new ground in allowing consumers to collectively seek damages for a systemic issue. It brought to light the inner workings of card fees and the involvement of major banks like Lloyds in those processes. It also ended in a cautionary tale: even with legal innovation, outcomes may fall short of initial expectations. Nonetheless, the case’s legacy – from the Supreme Court’s certification test to the spectacle of a funder fighting a settlement – will shape how future mass claims (whether competition, consumer, or financial) are handled. And the scrutiny it placed on industry practices adds to the mounting pressure on UK financial institutions (be it Mastercard, or banks like Lloyds) to adhere to fair practices, under the watchful eyes of regulators, tribunals, and an increasingly assertive cohort of consumer advocates.

Sources:

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