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WASHINGTON – Retailers and retail advocates are welcoming the announcement by the Supreme Court that it will take up a case asking the Federal Reserve to lower the cap on debit card “swipe fees.”
An amendment by Illinois Democratic Sen. Dick Durbin to the 2010 Dodd-Frank Act directed the central bank to set a “reasonable” cap on fees that banks charge merchants each time a customer swipes a debit card. Those fees must also be “proportional” to banks’ costs, according to the amendment.
The National Retail Federation is among those lauding the high court’s decision to accept the case after appellate courts disagreed on whether the statute of limitations had passed on a 2021 lawsuit seeking to have the Fed lower the cap it set on swipe fees 12 years ago.
The Fed in 2011 capped fees for financial institutions with $10 billion or more in assets at 21 cents, with an additional 1 cent for fraud prevention and 0.05% for fraud recovery.
The Supreme Court agreed to hear an appeal brought by the Corner Post, a North Dakota-based truck stop and convenience store, challenging the Fed’s cap on debit card swipe fees.
“Some lower courts have held that the statute of limitations to challenge the cap has run out even for small businesses that didn’t exist until long after it was issued,” Stephanie Martz, NRF’s chief administrative officer and general counsel said in a statement. “Regulations that ignore the intent of Congress and harm a business owner later don’t become less arbitrary merely by the passage of time. Basic concepts of due process and fairness require federal agencies to adhere to the laws that Congress drafts regardless of when the rules to implement those laws were issued. It’s been a dozen years since the Fed promulgated these rules, but Corner Post was harmed by them only recently and has every right to challenge them.”
Added Martz: “Beyond the statute of limitations question, the Fed set the debit card swipe fee cap far too high in the first place and has failed to update it as required by Congress. Banks’ costs of processing transactions have fallen dramatically, and these fees continue to drive up costs for merchants and prices for consumers. Retailers are now paying twice as much as they should if the Fed had followed the law. If the Fed isn’t going to act on its own, the courts need to enforce the law.”
NRF noted that the Federal Reserve has reviewed banks’ costs every two years — as required by the Dodd-Frank legislation passed in response to financial industry practices that contributed to the financial crisis of 2007-2008 — but has failed to comply with a requirement that it keep the fees proportional to costs.
The NRF, which is not a party in the Corner Post case, is also championing Durbin’s latest bill, the Credit Card Competition Act, which aims to bring down credit card swipe fees.
