Appeals court upholds Federal Reserve's 21-cent debit card swipe fee cap

March 21, 2014

A federal appeals court has today handed down a ruling in a back-and-forth drama that grew out of the 2010 Dodd-Frank Consumer Protection and Wall Street Reform Act. The ruling finds in favor of the Federal Reserve's 2011 compromise, in which a 21-cent limit was put on debit swipe fees. That was down considerably from what had been the previous average of 44 cents per transaction.

The National Retail Federation, which has been deeply involved in this battle all along, immediately announced a statement, echoing its disappointment.

"NRF is disappointed and remains confident that the Federal Reserve erred when it set the swipe fee cap far higher than intended by Congress," NRF Senior Vice President and General Counsel Mallory Duncan said. "The Fed ignored congressional intent and worked to shield debit card companies and big banks. A self-described victory for the banks usually results in higher costs for consumers."

As a result of the Durbin Amendment provisions of Dodd-Frank, the Fed adopted rules that specified "reasonable and proportional" fees, based on actual costs involved. The Fed calculated the actual average cost at 4 cents per transaction and initially proposed a cap no higher than 12 cents, but eventually settled on 21 cents after what NRF calls "heavy lobbying from the financial services industry."

NRF appealed in 2011, alongside several other retail groups. Judge Richard Leon eventually ruled in NRF's favor, and told the Fed to go back to the drawing board and do the calculations again. The Fed appealed, and today the court in D.C. ruled in its favor and overturned Judge Leon′s ruling.

According to the statement from NRF, this fight is probably not over yet.

"NRF's work over the past several years led to a cap that cut debit swipe fees in half," Duncan said. "That has saved many retailers and consumers billions of dollars but the fees, especially for small ticket transactions, are still far too high. We are reviewing the decision and will determine whether to appeal."

You can download and read the entire ruling here.

Topics: Payments , POS , Technology

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