STRATEGIC PARTNERS
Retailers dispute the appeals court ruling about fee caps, but seem to accept its ruling that one network each for signature and PIN debit is sufficient.
August 19, 2014
Declaring that the debate over debit card swipe fees is “of staggering importance,” a coalition of retailers has asked the U.S. Supreme Court to review an appeals court ruling that left the Federal Reserve debit fee cap in place at 21 cents rather than reducing it to Congress' recommended 12 cent limit.
Under the Dodd-Frank Consumer Protection and Wall Street Reform Act of 2010, the Federal Reserve was required to adopt regulations that would result in debit swipe fees “reasonable and proportional” to the actual cost of processing a transaction.
Incremental costs of authorizing, clearing and settling each transaction were allowed to be considered but fixed costs were not. The Fed calculated the average incremental cost at 4 cents per transaction and initially proposed a cap no higher than 12 cents, but eventually settled on 21 cents after heavy lobbying from the financial services industry, an NRF news release said.
A coalition of retailers argued that the 21 cent figure included costs beyond those allowed under the legislation and filed suit against the Fed in U.S. District Court in 2011. In July 2013, Judge Richard Leon ruled in favor of the NRF and ordered the Fed to recalculate the cap at a lower level.
The Fed appealed, and in March the U.S. Court of Appeals for the District of Columbia overturned Leon’s ruling, citing “ambiguity” in the 2010 law and saying the Fed based the cap on a “reasonable interpretation” of the measure.
The petition argued that the Circuit Court made a number of legal errors and “bent over backward to find ambiguity” in Dodd-Frank while ignoring the ‘text, structure and purpose” of the law.
Notably, retailers did not challenge the appeals court ruling that reinstated the Fed's multinetwork routing provisions, which district court Judge Richard Leon had also found to be contrary to the intent of Congress.
Leon ruled that Congress intended for the Fed to require at least two network options each for signature debit and PIN debit transactions. However, the court of appeals determined that two options for all debit transactions — whether signature or PIN — was sufficient to meet the requirements of Dodd-Frank.
Parties to the petition include NRF, the National Association of Convenience Stores, the Food Marketing Institute, the National Restaurant Association, Boscov’s Department Store and Miller Oil Co., all of whom were plaintiffs in the original lawsuit.
