- WHITE PAPERS
A judge from the U.S. District Court from Washington, D.C., ruled Wednesday in favor of a lower cap on fees charged by banks for debit card transactions at retailers.
Judge Richard Leon's ruling stated that the Federal Reserve ignored the intent of Congress when it capped the fees banks can charge retailers when their customers use debit cards, according to Reuters. The Federal Reserve, he wrote, violated the intent to issue regulations that would ensure "reasonable and proportional" swipe fees for merchants.
The National Restaurant Association called the ruling a "major victory."
"In particular, this ruling should provide relief for merchants with small-dollar tickets on whom Visa and MasterCard used the Federal Reserve's original final rule as an excuse to more than triple rates on those transactions," said Scott DeFife, NRA EVP of policy and government affairs.
The NRA partnered with the Food Marketing Institute, the National Association of Convenience Stores, the National Retail Federation, Boscov's Department Store and Miller Oil Company to file a lawsuit against the Federal Reserve in 2012 over its rule that included a 21-cent limit on swipe fees. This rule was a significant increase over the 7-cent safe harbor and 12-cent cap included in the 2010 proposed rule.
The NRA was a lead supporter of the debit-card fee reforms in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
According to the NRA, "After the Federal Reserve issued its final rule, Visa and MasterCard announced they would raise swipe fees to the Fed's cap on small-ticket transactions of $15 and less, a move that hurt small businesses with heavy small-ticket volume, such as quick-service restaurants."
The plaintiffs also argued that the final rule eliminated or limited competition on debit routing and PIN transactions.
"From the very beginning, retailers and restaurants knew the Federal Reserve Board of Governors had grossly misapplied the swipe fee law, also known as the Durbin Amendment. They failed to heed Congress' call to set fee standards that were 'reasonable' and 'proportional' to the actual cost of a transaction. Instead, the Board manufactured a standard that was two to three times higher than the Fed staff recommended. As a result, small ticket transactions, such as those imposed on convenience stores and restaurants, skyrocketed under the misapplied law," said National Retail Federation Senior Vice President and General Counsel Mallory Duncan.
"Today's decision is the first step in setting these initial wrongs right and will ensure that swipe fee reform is done correctly."
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