The National Retail Federation urged a three-judge appeals panel on Friday to uphold Judge Richard Leon’s July ruling that the Federal Reserve cap on debit swipe fees is too high and that the cap should be lowered.
“Nearly four years after the law was passed, debit swipe fees are still far higher than they should be, and banks are raking in billions of dollars in unearned profits every year as a result,” NRF Senior Vice President and General Counsel Mallory Duncan said. “Instead of doing what Congress ordered, the Fed gave in to pressure from big banks – and retailers and their customers are paying the price. It’s time for the Fed to follow the law instead of catering to the industry it is supposed to regulate.”
The panel held an appeals hearing on Friday and took testimony from stakeholders in the case. Leon ruled in July that the Fed’s 21-cent debit swipe fee cap that took effect in 2011—also known as the Durbin Amendment—was too high.
Under the Durbin Amendment, the Fed was required to adopt rules that would lower debit card swipe fees from an average 45 cents per transaction to a “reasonable” level “proportional” to banks’ costs for processing the transactions.
The rule allowed the Fed to take into consideration the incremental costs of acquiring, clearing and settling transactions but did not allow for the inclusion of other expenses. The Fed originally estimated the costs at four cents and initially proposed a cap of 12 cents, with the cap eventually raised to 21 cents.
Leon sided with the NRF in his July ruling in finding that the Fed rules do not comply with a congressional requirement that at least two competing processors be available for reach transaction, regardless of whether consumers use debit or credit when using a debit card.