Debit Swipe-Card Fee Drama Continues
In 2010, Congress passed legislation requiring the Federal Reserve to create regulations which reduce swipe fees for debit cards, then averaging 45 cents per transaction, down to a more reasonable level. After heavy lobbying by banks saying the proposed 12 cents per transaction was too low, the current 21 cents per transaction was set. The NRF sued the Federal Reserve in 2011 on the claim that the cap was still too high.
Last month, Judge Richard Leon agreed, and ordered banks to recalculate the cap at a lower fee. He initially agreed to have the cap remain in place during the recalculation, but when the Federal Reserve announced its appeal, Leon was unsure he would allow the cap to remain, asking for a brief from banks and retailers.
Both parties of this ongoing case asked Leon to keep the Federal Reserve’s 21-cent cap on debit card swipe fees through the appeal process. The ruling stated the limit was too high, but both parties agree, for the time being, that a high cap is better than no cap at all. “If the regulations here were vacated by the district court, there would be no legally binding standards for determining the permissible amount of interchange fees an issuer could receive with respect to a debit card transaction,” the Federal Reserve said in a brief filed Monday. “Such a lack of restrictions would plainly frustrate the will of Congress.”
In a brief filed today by the retailers, they said “In the absence of, the credit card networks would be free to dramatically increase the interchange fees. Thus, the plaintiffs vastly prefer the status quo, to an unregulated free-for-all which would likely subject merchants to fees well in excess of the Fed’s current standard.”
Experience has shown that card networks increase interchange fees; they don’t lower them. The only direction the fees would move if the existing rule is abandoned, before a new rule takes effect, is up. Retailers have asked the Federal Reserve be given no more than three months to come up with a new, lower cap and it be effective within 30 days of its announcement, if the ruling of 21 cents is deemed to be too high.