In the latestskirmish in the 9-year legal battle over interchange fees, Wal-Mart, 7-Elevenand other retailers, joined by Senate Majority Whip Richard Durbin(D-Ill.), recently filed several briefs with the U.S. SupremeCourt. The group seeks to change the Federal Reserve's cap on debitcard interchange fees that took effect three years ago.

The retailers and the author of the Durbin Amendment, picturedat left, contend that the interchange fee cap was set higher thanCongress intended when it passed the Dodd-Frank Consumer Protectionand Wall Street Reform Act of 2010, according to court documentsand sources involved in the case.

Wal-Mart and 7-Eleven, which opted out of the $7 millionantitrust settlement with Visa and MasterCard, filed separateamicus briefs last week, arguing the Fed misinterpreted thelegislation's intent and the fee cap should be lowered, saidattorney Jeffrey Shinder, who represents 7-Eleven and a group ofsmall ticket merchants involved in the litigation.

In July, U.S. District Court Judge John Gleeson ruled thatWal-Mart and other retailers displeased with the settlement could continue withnew litigation.

Shinder told CU Times his clients believe the Fedtwisted the law to empower a price increase for all regulated debittransactions below certain thresholds.

“MasterCard has described small ticket transactions as the holygrail of debit growth and very soon the majority of debittransactions will be made for $15 or less,” said Shinder, amanaging partner of Constantine Cannon's New York City office.

“As a result, this flaw in the Federal Reserve's analysisthreatens to subvert the entire purpose of the law,” he continued.“Because of the Federal Reserve's legally flawed rulemaking theprice of what very soon will be the majority of the debit volume inthis country will be higher with the regulations than it would havebeen without it.”

“Nothing better reflects the arbitrary and capricious nature ofthe Fed rulemaking than that,” Shinder added.

Randy Hargrove, director of national media relations forWal-Mart, told CU Times that the mega retailer is hopingthe interchange issue can be resolved in a manner that benefitsconsumers.

“Congress passed the Durbin Amendment to reduce debit cardexpenses significantly for consumers,” Hargrove said in a phoneinterview.

“Unfortunately, the regulations adopted by the Federal Reserveand approved by the D.C. Circuit have fallen short of theamendment's goals and set interchange fees on debit transactionshigher than they legally should be,” he continued. “We hope theSupreme Court will side with our customers and require newregulations that result in lower debit card expenses.”

Wal-Mart led a class of retailers that won a $3 billionsettlement with Visa and MasterCard over different antitrust claimsin 2004.

Read more: Durbin says current interchange cap harmsconsumers …

In the current litigation, Durbin filed afriend-of-the-court brief filed last week in support of theNational Retail Federation and other retailers.

In his brief, Durbin claimed the 21-cent cap set in 2011 goesbeyond the “reasonable and proportional” level mandated by Congressunder the Durbin amendment.

The amendment was carefully crafted to respond to collusion,market failures and excessive fees within the electronic debitsystem, but the D.C. Circuit Court erred by deferring to theinclusion of “third category” bank costs in its rulemaking,according to Durbin's brief.

The inclusion of such costs was contrary to the DurbinAmendment's text and legislative history, the document said.

“Unfortunately, the board's final rulemaking failed tosufficiently follow the text and purpose of the law,” the briefsaid. “Because interchange fees are ultimately borne by consumersin the form of higher retail prices, consumers have suffered as aresult.”

The Fed announced last month that it does not plan to revise theinterchange fee standard or the fraud-prevention adjustment.

A Sept.18 report issued by the Fed noted that debit swipe fees totaled$16.3 billion last year, down from about $20 billion in 2012.

According to EFTA provisions, interchange fees should notexceeds 21 cents plus 5 basis points multiplied by the value of thetransaction, plus a 1-cent fraud prevention adjustment, ifeligible. However, the fee cap does not apply to debit card issuerswith consolidated assets of less than $10 billion, which includesmost credit unions, as well as certain government-administereddebit cards and certain prepaid cards.

Last year, a U.S. District Court judge agreed with NRF that thelimit was too high, but the U.S. Circuit Court of Appealsoverturned the ruling this year, citing “ambiguity” in the 2010law.

This summer, NRF asked the Supreme Court to hear the case, butthe court has not yet announced if it will.

“If the Fed had followed the law passed by Congress, theseoutrageous fees would be dramatically reduced,” wrote MalloryDuncan, NRF's senior VP and general counsel, in an emailto CU Times. “Main Street businesses and theircustomers are being fleeced on these swipe fees.”

Durbin contended in his recent friend-of-the-court brief thatthe Fed was only allowed to consider the costs of authorizing,clearing and settling each transaction.

Initially, the Fed calculated costs at an average of 4 cents pertransaction and proposed a cap of up to 12 cents, but the 21-centlevel was set after the banking industry expressed outrage with theboard's draft rulemaking and launched an aggressive lobbyingcampaign to weaken the draft rule, according to Durbin's brief.

“Congress neither instructed nor empowered the board to imposeits own policy judgments and engage in a line-drawing exercisebetween merchants' desire for low fees and banks' desire for highfees,” the brief stated. “Congress tasked the board to follow thelaw Congress enacted, not to circumvent it at the request of thebanking industry.”