Retailers Sue Fed on Interchange Rule
Saying that the debit card swipe fees set by the Federal Reserve were neither reasonable nor proportional, the National Retail Federation and other groups sued the agency.
In the lawsuit, filed in U.S. District Court in Washington, they alleged that Fed failed to follow the intent of the Dodd-Frank bill which mandated that the Fed regulate swipe fees.
“Rather than following the law, it’s almost as if the banks and the Fed were working hand-in-glove to block the genuine competition and common-sense price reductions Congress directed,” National Retail Federation Senior Vice President and General Counsel Mallory Duncan said in a statement. “The Fed’s regulations have blunted the competition that would have made greater savings possible.”
On June 29, the Fed issued its final rule that capped interchange fees at 21 cents a transaction, up from the original proposal of 12 cents, with a one-cent fee for fraud prevention and a five basis point allowance for fraud costs. The rule took effect this fall.
Under the Durbin amendment to the Dodd-Frank bill, which mandated that the Fed regulate debit swipe fees, card issuers with assets of $10 billion were exempt from the caps. But several officials, including
Federal Reserve Chairman Ben Bernanke and representatives of credit unions and small banks said they doubted it would be possible to maintain a two-tiered system.
The lawsuit also alleges that the regulations have led to an increase in swipe fees for some small-ticket purchases.
The suit also states that the rules discourage competition among debit card networks.
The National Retail Federation filed the lawsuit on its own behalf and its National Council of Chain Restaurants division. Other plaintiffs include National Association of Convenience Stores and the Food Marketing Institute.
Meanwhile, a bill to repeal the Durbin amendment and lift the cap has been filed in the House by a bipartisan pair of congressman who said it was unfair to banks and credit unions.