Tags: Fed | Appeals | Swipe | Fee

Fed Appeals Ruling on Swipe Fee for Debit Cards

Wednesday, 21 Aug 2013 07:01 PM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
The U.S. Federal Reserve on Wednesday appealed a judge's decision to reject the agency's cap on debit card transaction fees, a controversial requirement of the 2010 Dodd-Frank law.

The Wall Street reform law ordered the Fed to limit "swipe fees," or the fees banks charge merchants when customers use debit cards.

Judge Richard Leon of the U.S. District Court for the District of Columbia ruled in late July that the Fed's fee cap of 21 cents per transaction was higher than Congress intended.

Banking industry groups protested that ruling, saying they need to charge the fees to offset the costs of offering debit cards.

The Fed filed its appeal on Wednesday, according to documents posted on the district court's website.

"The Federal Reserve's decision to appeal is the right thing to do for consumers who value debit cards and the financial institutions that serve them," Frank Keating, president of the American Bankers Association, said in a statement on Wednesday.

Lawmakers included the fee cap in Dodd-Frank in hopes it would trickle down to consumers in the form of lower prices.

The Fed set the cap at 21 cents in 2011.

Retailers, who had been expecting a much lower limit on swipe fees, complained the Fed had caved to lobbying by banks.

The National Retail Federation and other groups filed a lawsuit to overturn the Fed's cap. The judge's eventual decision to rule in their favor dragged down shares of card companies Visa Inc and MasterCard Inc.

The retail group criticized the Fed's decision to appeal on Wednesday.

"We are very disappointed to see the Fed giving in to the banks," the group said in a statement. "The Fed has taken a position that will drag this out while retailers and their customers continue to pay billions of dollars in inflated fees."

Visa and MasterCard set the fee level that banks charge retailers for using their networks. Visa shares were up 3 percent at the end of the day on Wednesday, while shares of MasterCard fell slightly.

 

INTERIM RULE

Last week, Judge Leon ordered the Fed to determine whether it could write an interim rule lowering the cap, which would take effect immediately but could be adjusted later, and to report back to him on how long that would take.

Scott Alvarez, the Fed's general counsel, told Leon in court on Wednesday that the agency would prefer to keep the current fee cap in place while it went through the appeals process.

Alvarez said it would be unreasonable to ask the Fed to craft new fee limits at the same time that the agency was asking an appeals court to approve its initial cap.

Attorneys representing retail groups and banks both said they would have to change their systems to comply with an interim rule, even though an appeals court might wind up validating the original swipe fee cap.

"Switching back and forth is something that imposes costs on everybody," said Seth Waxman, an attorney with WilmerHale. He spoke on behalf of a number of banking industry trade groups, including the American Bankers Association, which were not directly involved in the lawsuit.

Alvarez said if Leon did not stay his ruling, the Fed would ask the appeals court to do so. Leon said he would "keep an open mind" as he considered it.

© 2014 Thomson/Reuters. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 

You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved