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Top Court Rejects Challenge to Debit Card 'Swipe Fees' Rules

Tuesday, 20 January 2015 12:12 PM

The U.S. Supreme Court on Tuesday declined to take up a challenge by retailers to the Federal Reserve's controversial rules for debit card "swipe fees."

Businesses pay the fees to banks when customers use debit cards to purchase goods or services. The fees reimburse banks for costs involved in offering debit cards.

The high court's rejection of the appeal means a March 2014 ruling by the U.S. Court of Appeals for the District of Columbia Circuit that upheld the rules stays intact.

At the instruction of Congress, the Fed in 2011 limited the fees to 21 cents per transaction. A U.S. district court in July 2013 agreed with a group of retailers that lawmakers intended the cap to be lower and overturned the Fed's rule.

The appeals court said the law's "ambiguity" gave regulators leeway to set a higher fee cap.

The National Retail Federation, whose members include Wal-Mart and JCPenney, the National Restaurant Association and other groups sued the Fed in 2011 over the fee cap.

Swipe fees, also known as interchange fees, are set by Visa Inc., MasterCard Inc. and other card networks. Before Congress intervened, the fees paid by retailers were about 44 cents per transaction.

Hoping that lower fees would result in lower prices for consumers, lawmakers called for a cap in the 2010 Dodd-Frank law.

They directed the Fed to set a limit that would cover the costs to banks to provide the cards, ignoring any expenses that were not tied to specific debit transactions.

The Fed decided network processing fees, costs to monitor transactions for fraud and other expenses were relevant even though they were not specifically mentioned in the law, and it incorporated them into the 21-cent cap.

Merchants argued those costs went beyond what was allowed under the law.

The appeals panel said Dodd-Frank's language was "confusing and its structure convoluted" but determined that it did leave room for the Fed to consider additional costs.

"The court's ruling means retailers will keep paying billions of dollars more than they should, and that fee-hungry banks will continue to rake in unearned profits that ultimately come out of consumers' pockets," said the National Retail Federation's general counsel, Mallory Duncan.

Richard Hunt, head of the Consumer Bankers Association, disagreed, saying government-mandated price controls, known as the Durbin amendment, "have yet to work as advertised, and retailers still have not proved savings have been passed on to consumers."

"Make no mistake about it — consumers must come first in this process, not the bottom-line of retailers," Hunt said.

The case is NACS v. Board of Governors of the Federal Reserve System, U.S. Supreme Court, No. 14-200.

© 2020 Thomson/Reuters. All rights reserved.

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The U.S. Supreme Court on Tuesday declined to take up a challenge by retailers to the Federal Reserve's controversial rules for debit card swipe fees.
supreme court, retailers, appeal, swipe fees
Tuesday, 20 January 2015 12:12 PM
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