Several of the nation's largest banks, including Citigroup's Citibank and Bank of America, illegally fix the price of credit-card transaction...

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CHARLOTTE, N.C. — Several of the nation’s largest banks, including Citigroup’s Citibank and Bank of America, illegally fix the price of credit-card transaction fees, a group of small businesses charge in a lawsuit.

“For the average consumer, you have to pay $200 to $300 per year in additional costs for merchandise, whether you pay with plastic or in cash,” K. Craig Wildfang, an attorney at the Minneapolis-based firm representing the plaintiffs, said yesterday. “It’s like an invisible 2 percent sales tax on everything you buy.”

The suit concerns the fees charged by banks to merchants each time a customer makes a purchase using a MasterCard or Visa card, and charges that there is no limit on the banks’ ability to set the “exorbitant” fees.

In a statement, a Visa spokesman said the company planned to “vigorously defend” its use of the so-called interchange fees, which it called “a practice that has been successful in the marketplace as well as upheld as legal and necessary in federal court.”

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“We believe the merchants in this suit are seeking to shift their normal costs of doing business onto someone else, the consumer,” said Josh Floum, executive vice president and general counsel for Visa.

Filed Wednesday in federal court in Connecticut on behalf of five businesses in California, Minnesota and Connecticut, the suit seeks to represent the nation’s retailers as a class.

The litigation asked the court to end what it called the banks’ anti-competitive behavior and award damages, which Wildfang said could reach tens of billions of dollars.

Plaintiffs seek relief

“There is absolutely no need for these fees to be so high, and without anything to control them, the banks and the credit-card companies continue to find ways to escalate the fees,” said plaintiff Mitch Goldstone, president and chief executive of 30 Minute Photos Etc. and, a national online boutique photo service, in a statement released by Wildfang’s law firm.

Among those named in the lawsuit are Bank of America and Wachovia, as well as Citigroup and JPMorgan Chase and other leading banks. Visa and MasterCard are also named.

Bank of America spokeswoman Shirley Norton said the bank had not been served with the lawsuit and could not comment. A Wachovia spokeswoman said the bank does not comment on pending litigation, and messages left at MasterCard and Citigroup were not immediately returned.

In 2003, Wal-Mart, the world’s largest retailer, negotiated a multibillion-dollar settlement with Visa and MasterCard over the use of the fees. Other large retailers, such as Home Depot and Best Buy, have either won fee cuts or are in talks to do so, according to The Wall Street Journal, which first reported details of the lawsuit.

But Wildfang, who said regulatory authorities in many other countries have adopted measures to control the fees, said prior legal actions in the U.S. didn’t address the core problem: the enormous marketing power of Visa and MasterCard.

“This case is aimed at solving that problem by prohibiting them from doing it,” he said.