A U.S. district court invalidated the Federal Reserve’s Durbin Amendment on Tuesday, saying the Fed ran “completely afoul of the text, design and purpose” of the provision.
Judge Richard Leon ordered the central bank to recalculate the cap on debit interchange fees, saying the Fed included costs of debit card issuing in its calculation of the cap that Congress did not intend when it passed the provision, Credit Union Times reports.
“In short, the Board’s interpretation is utterly indefensible,” Leon said, according to Credit Union Times. “As explained above, the statute is not silent or ambiguous. Rather, the plain text of subsection (a)(4)(B) and the statutory structure and legislative history of the Durbin Amendment clearly demonstrate that Congress intended for the Board to exclude all other costs.”
The decision marked a win for credit unions and retail groups that lobbied against the 21-cent cap.
“From the very beginning, retailers and restaurants knew the Federal Reserve Board of Governors had grossly misapplied the swipe fee law, also known as the Durbin Amendment,” the National Retail Federation said. “They failed to heed Congress’ call to set fee standards that were ‘reasonable’ and ‘proportional’ to the actual cost of a transaction. Instead, the Board manufactured a standard that was two to three times higher than the Fed staff recommended.”