A collection of trade groups that represents many of America’s financial institutions filed an amicus brief on Thursday in a lawsuit that has been brought by merchants who are seeking to lower the cap on interchange fees even further.
The brief charges that the Federal Reserve’s June Final Rule on interchange fees is flawed because it breaches the Durbin Amendment by putting caps on interchange fees that are too high to allow debit card issuers to cover costs and see a reasonable return on their investments. Under the Durbin Amendment, interchange fees – commonly referred to as swipe fees – are capped at 21 cents, the total amount a bank can charge a merchant to process a debit transaction.
The brief also claims that financial institutions do not benefit from the rule and neither do America’s consumers.
“The merchants have claimed all along that imposing government price controls on interchange fees would directly benefit consumers, yet there is absolutely no evidence that they have lowered their prices,” Trish Wexler, a spokeswoman for the coalition, said. “So, while consumers have gotten nothing from the retailers, the merchants are back asking the courts to add even more to the $6 billion windfall they are now enjoying.”
Banks were projected to lose approximately $6 billion in interchange revenue as a result of the Durbin Amendment. Some banks have responded by eliminating merchant discounts and imposing fees on checking accounts. Smaller businesses are hurt by the rule, as they pay the same interchange fee for a $15 transaction that a larger retailer would pay for a $1,000 transaction.
Smaller financial institutions have expressed growing concern about the rule and its long-term impact.
“Even the smallest credit unions and community banks will ultimately be harmed along with larger financial institutions,” Credit Union National Association President and CEO Bill Cheney said,. “That means customers of all sizes of institutions will face the increases in fees and cuts in benefits that will be needed to continue supporting the payment systems infrastructure.”