The Durbin Amendment, part of the 2010 Dodd-Frank Act, limits the amount a bank can charge a merchant to process a debit transaction, also known as swipe fees. The suit alleges, however, that the Federal Reserve’s ruling does not run parallel with Congress’s intent to ensure that the swipe fees are reasonable and proportional to the cost to banks.
The suit also alleges that the final ruling does not promote competition among card networks, which may help to lower the swipe fees. Ultimately, the suit seeks to lower the swipe fees by making improvements to the existing ruling.
Following the Federal Reserve’s final ruling on the Durbin Amendment, Visa and MasterCard announced that they would increase swipe fees to the maximum allowable on low-cost transactions – transactions that are $15 or less. This negatively impacts small businesses whose goods are mainly considered low cost, such as a cup of coffee or candy. These smaller businesses pay the same amount in swipe fees for small-ticket transactions as larger businesses whose transactions are much larger.
“While the Federal Reserve’s rule significantly brought down debit swipe fees for many merchants, some small businesses will pay higher fees on smaller ticket transactions – evidence that the Fed provided card networks like Visa and MasterCard too much latitude to increase rats well above a reasonable and proportional level,” Scott DeFife, the executive vice president of policy and government affairs for the National Restaurant Association, said. “Allowing higher fees on small-ticket bills was not the intent of Congress, and the Federal Reserve must reconcile this failure to comply with the law as intended.”