The Federal Reserve announced late Aug. 21 that it will appeal the recent ruling by the U.S. District Court in Washington that it set the cap on debit card transactions too high.
The Federal Reserve's decision to challenge the ruling means the current regulations governing swipe fees could remain in place for years as the legal challenge works its way through the appeals process. The National Retail Federation, NACS and other groups that filed a lawsuit to overturn the cap quickly criticized the Federal Reserve for its decision, saying the agency was "giving in to the banks."
Judge Richard Leon in late July ruled that the Federal Reserve Board disregarded Congressional intent when deciding how much banks can charge for the transactions under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
He subsequently chastised the agency for taking too long to address the issue, and gave the Federal Reserve until Aug. 21 to come up with a position on interim fee reductions and a timeline for permanently installing new lower fees. He also suggested that retailers should be repaid by financial services companies for millions of dollars in overcharges.
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 could be charged for all debit transactions on card issuers with more than $10 billion in assets.
This article originally ran in NATSO News, NATSO's member only weekly electronic newsletter. NATSO News is packed with the latest updates on government and business issues affecting the truckstop and travel plaza industry.
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