U.S. court upholds Fed's cap on swipe fees; NRF ‘disappointed’

Washington, D.C. -- The U.S. Appeals Court for the District of Columbia on Friday overturned a lower court's decision in July that favored the merchants and was a setback for banks. The National Retail Federation expressed disappointment with the decision, which will keep the Federal Reserve’s cap on debit card swipe fees at 21 cents rather than reducing it to a lower level.



“NRF is disappointed and remains confident that the Federal Reserve erred when it set the swipe fee cap far higher than intended by Congress,” said NRF senior VP and general counsel Mallory Duncan. “The Fed ignored congressional intent and worked to shield debit card companies and big banks.”



Under the Durbin Amendment provisions of the 2010 Dodd-Frank Consumer Protection and Wall Street Reform Act, the Federal Reserve was required to adopt regulations that would result in debit card swipe fees that were “reasonable” and “proportional” to the actual cost of processing a transaction. 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 heavy lobbying from the financial services industry.



While far improved from the average of 45 cents before the cap was set, NRF thought the figure was higher than what was sought by Congress and filed an appeal in U.S. District Court in 2011 along with other retail groups. In 2013, Judge Richard Leon ruled in NRF’s favor and ordered the Fed to recalculate the cap at a lower level, but the Fed appealed. On Friday, the U.S. Court of Appeals overturned Leon’s ruling.




The Fed, which had appealed the lower court ruling, said Friday that it was pleased with the appeals court decision.



The banking industry welcomed the ruling.



"Reasonable minds have prevailed," Richard Hunt, president of the Consumer Bankers Association, said in a statement.