NAPLES — In 2005, Mike Schumann, a Naples resident and business owner, took on Visa, MasterCard and the big banks, fed up with their ever-increasing "swipe fees."
He reached out to Robins, Kaplan, Miller & Ciresi, headquartered in Minneapolis, because of the law firm's historic multibillion-dollar tobacco settlement.
"I needed a firm with deep pockets," he said, and one that would charge only if his case was successful.
He spurred a class-action suit that resulted last week in a proposed $7.25 billion settlement with retailers over credit card fees. The settlement, filed Friday in federal court in Brooklyn, still must be approved by a judge.
"It took a lot longer than I expected," Schumann said. "When we filed this lawsuit we expected that within two to three years the case would get settled. We were confident all along the case would be settled. We didn't know how good of a deal we would get."
In the lawsuit, retailers alleged Visa Inc., MasterCard Inc. and the big banks, including Wells Fargo, Bank of America, Citibank and JPMorgan Chase, colluded on credit card transaction fees, creating a monopoly that drove up costs for merchants and ultimately consumers.
Now, businesses can't directly charge customers for the swipe fees, but to make up for the cost retailers often raise prices for everyone.
Schumann challenged the big boys because credit card processing fees swiped so much of his company's profits. He and his wife, Suzanne, own Traditions Classic Homes Furnishings, with two stores in Minnesota and another in downtown Naples on Sixth Avenue South, next to the U.S. post office.
The deal reached with Visa, MasterCard and 13 of the nation's biggest banks would be the largest anti-trust settlement of its kind in U.S. history, but some retailers aren't buying it, saying it's not enough. Appeals are possible.
"It's an extremely expensive and complicated process to do a suit like this," Schumann said. "The reason we settled was we didn't think we could get a better deal."
One of the plaintiffs in the lawsuit, the National Association of Convenience Stores, has rejected the settlement, saying it fails to "introduce competition and transparency into a clearly broken market."
"Consumers and merchants ultimately will pay more as a result of this agreement — without any relief in sight," said Tom Robinson, the association's chairman and president of Robinson Oil Corp. in Santa Clara, Calif.
K. Craig Wildfang, an antitrust attorney in Minneapolis and lead counsel for the plaintiffs, said he assumed some merchants would be unhappy with the settlement because there's always those who want to hold out for more. There is time to change the minds of skeptical merchants.
There is a two-step process for court approval of the settlement, Wildfang explained. First the judge must decide whether the settlement is reasonable, then there will be a final hearing to consider fairness, he said.
The settlement could benefit millions of retailers, even those that have gone out of business, Schumann said. There are about 7 million retailers in the class.
"The amount of money that retailers are going to be getting back is a relatively small sum when you look at what the fees are that they have paid out over the years," Schumann said. "But it's still going to be a big check."
As part of the settlement, credit card processing fees would be temporarily lowered.
More importantly, Schumann said, will be longer-term changes the settlement could bring. Credit card companies and their issuing banks have agreed to modify their rules and practices to give merchants more flexibility to encourage their customers to use debit cards, cash or checks to avoid the higher credit card transaction fees.
Under the settlement, more retailers could stop accepting credit cards altogether or put a 2.5 percent to 3 percent surcharge on purchases made with credit cards to cover the swipe fees, which ultimately could encourage banks to lower the fees, he said.
"My gut feeling is that the gas stations are going to be the ones that are going to jump on this the fastest," Schumann said. "There are already parts of the country where cash pricing is pervasive."
Credit card surcharges have long been prohibited by Visa and MasterCard in their use agreements with retailers.
"Visa and MasterCard had a no-discrimination rule that said, 'You can't treat our cards any differently than you treat any other form of payment," Wildfang said.
After the class-action lawsuit was filed, the credit card companies changed their rules to allow merchants to offer discounts on cash purchases, but many merchants were hesitant to do it because there still were limitations on what they could do at the time of the sale, he said.
The Schumanns, who started their business 25 years ago in Minnesota, saw their credit card processing fees steadily climb, largely driven by more generous rewards programs offered by the issuing banks.
"It's a huge impact on us. Credit card transactions are the third-largest overhead expense we have, after rent and payroll," Schumann said.
He estimates his business spends $50,000 to $100,000 on credit card fees a year.
"A business our size will get in the tens of thousands of dollars in the refund," Schumann said. "How many tens I can't tell you. I don't know. You'll get a check and it's not something you are going to lose in your desk drawer."
While his business is headquartered in Minnesota, these days Mike Schumann, 61, spends more time in Naples. He's here about eight months out of the year.
"As I get older, I really don't like cold weather. And I've really gotten to like Naples," he said.
The Schumanns opened their store in Naples about 10 years ago after a customer from Estero, who was visiting one of their Minnesota stores, suggested they expand here because so many Minnesotans winter in Southwest Florida. After an unusually bad winter up North in 2002, they decided to check out Naples and were hooked.
They bought a condo, then opened a store here.Now, he's more involved in the Naples community than he is in St. Paul, Minn., where he still has a home. He volunteers for the Naples SCORE chapter, which offers free mentoring to entrepreneurs and small businesses.
"It's a really interesting community," he said. "It's a great community, particularly for Minnesotans."