Mastercard Settlement Faces Criticism, Raises Concerns for UK Class Action Funding

Mastercard's recent settlement of a class action lawsuit filed by British consumers has drawn criticism, sparking concerns about the potential impact on funding for the UK's growing class action sector.

Settlement Details

In December 2023, Mastercard agreed to settle the long-running litigation over card fees for £200 million, significantly below the £10 billion valuation placed on the lawsuit earlier. This settlement implies that each member of the 44 million-strong claimant class would receive approximately £2.27 if all eligible individuals claimed payment.

Funding Concerns

The settlement is being contested by funder Innsworth Capital, which is set to receive half of the settlement sum. Innsworth claims to have spent over £45 million funding the litigation against Mastercard and considers the settlement "clearly unfair." The funder argues that it is entitled to a higher share of the proceeds given its significant investment.

Legal Uncertainties

The dispute adds to existing uncertainties surrounding class action funding in the UK. In 2023, the Supreme Court ruled that certain funding agreements were void, casting doubt on the validity of funding arrangements. Additionally, the Court of Appeal is set to consider the lawfulness of funding agreements for cases against Apple and Sony later this year.

Impact on Class Action Funding

The Mastercard settlement and ongoing legal uncertainties could deter funders from participating in UK class actions. Funders may become less willing to invest in cases if they perceive the potential returns to be inadequate or if they face legal challenges to their agreements.

Consumer Protection Concerns

Consumer advocate Walter Merricks, who led the Mastercard case, argues that the settlement fairly compensates consumers while Mastercard maintains that the value of the lawsuit was significantly reduced by adverse legal decisions. The dispute highlights the tension between consumer protection and ensuring that class actions are not exploited for financial gain.