Federal Reserve Files Appeal in Swipe Fee Litigation

The U.S. Federal Reserve Board has filed its appeal of U.S. District Judge Richard Leon's decision that rejected the swipe fee rules that have been in place since October 2011, arguing that it followed the law. The Fed also accused retailers of a misguided interpretation of certain aspects of the legislation.

In his July 31 ruling, Leon instructed the Federal Reserve to rewrite the rules governing swipe fees, saying that the Federal Reserve disregarded Congressional intent when deciding how much banks can charge for the transactions under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

In the appeal, the Fed defended its looking at a broader view of costs when considering the cap on debit interchange, contending that a narrow definition of costs sought by retailers goes against the way Congress has used similar language and similar terms in the past.

The Fed said retailers’ request for multiple routing options was based on a “stilted reading of the statutory text.” The Fed's regulation required debit card issuers to offer two payment networks on a card. However, retailers sought two PIN and two signature debit alternatives.

“Even accepting that the merchants’ view represents one possible interpretation, it is not the best—and is certainly not the only—reading of the statute, which addresses only issuer and network restrictions on routing choice and is silent with respect to limitations caused by merchants or consumers. In these circumstances, the board’s reasonable interpretation must prevail,” the Fed argued.

The Federal Reserve announced its plan to appeal in August. In September Leon granted the board's request to leave the current rules in place until the appeal is resolved.

Retailers have until Nov. 20 to file their arguments in the case, according to published reports. No date has been set for oral arguments.  

Tiffany Wlazlowski Neuman's photo

Tiffany Wlazlowski Neuman

Tiffany Wlazlowski Neuman develops and executes communications strategies to advance NATSO’s public relations and advocacy goals. Tiffany also develops and oversees partnerships related to the NATSO Foundation’s public outreach initiatives. Tiffany lives in the D.C. metro area with her husband and their two sons.More
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