Supreme Court Denies Swipe Fee Appeal

January 26, 2015

The U.S. Supreme Court on Jan. 20 declined to hear a challenge to the Federal Reserve’s rule over transaction fees that retailers are forced to charge customers when they swipe a debit card.

The refusal to hear the case ends a three-year federal court battle and deals a major blow to retailers by upholding the March 2014 ruling by the U.S.Court of Appeals for the District of Columbia that found the fees were appropriate.

National Retail Federation general counsel, Mallory Duncan, said the high court’s rejection means retailers will keep paying billions of dollars more than they should, and that “fee-hungry” banks will continue to rake in unearned profits that ultimately come out of consumers’ pockets.  

Duncan added that merchant groups will continue to fight swipe fees.  “There is still litigation pending on credit card swipe fees, and policymakers continue to be concerned by the anti-consumer and anti-competitive practices of the card industry,” he told The Hill newspaper.

The Durbin Amendment of the Dodd-Frank Wall Street Reform required the Federal Reserve to issue rules ensuring debit card interchange rates are reasonable and proportional to the costs incurred. Effective Oct. 1, 2011, the fees that retailers had to pay on all PIN and swiped debit card transactions changed to 24 cents.

The Federal Reserve Board set the per-transaction cap at 21 cents and also allowed for an additional charge of 0.01 cent to cover fraud as well as .05 percent of the sales amount. The new interchange fees can be charged for all debit transactions on card issuers with more than $10 billion in assets.

In July 2013, a judge for the U.S. District Court in Washington rejected the Federal Reserve’s regulations governing swipe fees, ruling that the agency set the cap too high on debit-card transactions. The District Court Judge said the Federal Reserve Board disregarded Congressional intent when deciding how much banks can charge for the transactions. 

However, A U.S. Appeals Court in March 2014 reversed the lower court’s decision and upheld the Federal Reserve’s rules governing interchange fees. 

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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