NRF calls on Federal Reserve to lower swipe fee cap

The National Retail Federation (NRF) has called on the Federal Reserve to approve lowering its cap on debit card swipe fees.

The Fed announced today that the Board will meet next Wednesday to consider “proposed revisions to the Board’s debit interchange fee cap.” Details of the proposal were not released. 

NRF is calling on the Fed to approve lowering its 21-cent cap on debit card swipe fees. Since 2011, the amount large banks and card networks charge retailers to process debit card transactions has been capped at 21 cents – plus 1 cent for fraud prevention and 0.05% of the transaction amount to cover fraud costs. The cap applies only to cards issued by banks with at least $10 billion in assets.

“Congress told banks a dozen years ago that debit card swipe fees should be ‘reasonable and proportional’ but they’ve never been either,” said NRF chief administrative officer and general counsel Stephanie Martz. “It’s time to set the cap that Congress intended and recognize that banks’ costs to process transactions have dropped significantly. Doing so would reduce costs for retailers and give them more savings to share with their customers by holding down prices in a time of inflation. These fees have been too high for too long and we’re glad to see the Fed is finally ready to act.”

Earlier this summer, the Retail Industry Leaders Association and the NRF called on Congress to pass the Credit Card Competition Act of 2023. The bipartisan legislation would let retailers route transactions over competing networks that offer lower fees and improved security. This week, the Merchants Payment Coalition (MPC) renewed calls for Congress to pass the bill.

“Debit cards are an electronic version of checks that have saved banks billions compared with handling paper checks, but swipe fees make them much more expensive for merchants and drive up prices for consumers,” said MPC executive committee member and National Association of Convenience Stores general counsel Doug Kantor. “The Fed tried to address high debit card fees over a decade ago, but didn’t go far enough, and banks’ costs have continued to fall while fees have stayed the same. It’s time for the Fed to update how much banks are allowed to charge and recognize that consumers, merchants and the economy can’t afford overinflated fees.”

Under the 2010 Durbin Amendment, Congress directed the Fed to adopt regulations requiring that debit card swipe fees be “reasonable” and “proportional” to banks’ costs. The Fed found the average cost was about 8 cents per transaction and proposed a cap of up to 12 cents but settled on 21 cents after lobbying by banks.

The NRF states that the Fed was required to review the cap every two years but has kept it the same even though banks’ average cost has steadily fallen, dropping to 3.9 cents as of 2019, the most recent year for which the Fed has released data.

NRF sued the Fed in U.S. District Court in 2011, saying the cap was set too high. A trial judge agreed but the ruling was overturned by the U.S. Circuit Court of Appeals for the District of Columbia, and the Supreme Court refused to hear NRF’s appeal. The Supreme Court agreed late last month to take up a 202 challenge to the cap brought by a North Dakota retailer and will decide whether the statue of limitations has expired.

According to the Nilson Report, debit and credit card swipe fees have doubled over the past decade, and totaled $160.7 billion in 2022. The NRF says the fees are among most merchants’ highest operating costs and drive up prices paid by consumers by more than $1,000 a year for the average family, and that debit card swipe fees account for $34.4 billion of the total.