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U.S. District Judge Richard Leon ruled today that the Federal Reserve misapplied Congress’ intent when it implemented required swipe fee reform regarding how much retailers are charged for debit card transactions.
“From the very beginning, retailers and restaurants knew the Federal Reserve Board of Governors had grossly misapplied the swipe fee law, also known as the Durbin Amendment,” said Mallory Duncan, senior VP and general counsel for the National Retail Federation (NRF). “They failed to heed Congress’ call to set fee standards that were ‘reasonable’ and ‘proportional’ to the actual cost of a transaction. Instead, the Board manufactured a standard that was two to three times higher than the Fed staff recommended.
As a result, small ticket transactions, such as those imposed on convenience stores and restaurants, skyrocketed under the misapplied law.”
Duncan added that “Congress clearly told the Fed to introduce competition and transparency into the debit card marketplace by making multiple networks available, so as to reduce swipe fees for merchants and their customers. The Fed failed to do so, and the court rightly ruled against them as a result." Duncan concluded that the decision "is the first step in setting these initial wrongs right and will ensure that swipe fee reform is done correctly.”
"We are delighted that the court agreed that the Federal Reserve Board exceeded its authority under the law in nearly doubling the interchange fees banks are allowed to charge merchants for debit transactions,” according to a statement released today by the Food Marketing Institute (FMI). “This ruling marks a major victory for supermarket shoppers and will ultimately result in lower costs at the checkout line by billions."
NRF, FMI, National Association of Convenience Stores, Oil Miller Co. and Boscov’s Department Store LCC filed the initial complaint with the court.