Retailers Fight to Change Debit Card Swipe Fees

The Federal Reserve has not adjusted its regulations to keep fees proportional as costs have fallen, according to a new lawsuit

RETAIL ASSOCIATIONS filed a lawsuit on April 29 seeking to have the Federal Reserve lower its 10-year-old cap on the swipe fees that banks charge to process debit card transactions. The lawsuit states that the agency wrongly applied federal laws, resulting in merchants paying billions of dollars more than Congress intended, while banks’ costs have decreased.

“The Fed allowed fees that were much too high in the first place,” stated National Retail Federation (NRF) Chief Administrative Officer and General Counsel Stephanie Martz. NRF is not a party, but Martz is co-counsel in the case. “Since then, banks’ costs have fallen steadily, but the Fed has refused to make adjustments, letting the problem grow even worse. Legislation passed by Congress requires that these fees be kept in proportion to costs to protect merchants and their customers, but the Fed has failed to do that.

“Since the Fed hasn’t acted voluntarily, it’s time for the courts to enforce the law,” she continued. “Retailers are paying twice what they should, and these fees ultimately drive up prices paid by the public. Banks should not be handed a growing windfall at the expense of Main Street stores and consumers.”

The North Dakota Retail Association and the North Dakota Petroleum Marketers Association jointly filed the lawsuit against the Federal Reserve Board of Governors in the U.S. District Court in Bismarck, N.D.

According to the lawsuit, the cap is higher than allowed under the 2010 Durbin Amendment, which directed the Federal Reserve to set regulations resulting in debit card swipe fees that were reasonable and proportional to banks’ costs. The Fed exceeded its authority by going beyond costs that Congress stated could be considered in writing its regulations, the suit argues.

The litigation seeks to have the cap recalculated and regularly adjusted if banks’ costs continue to fall in the future.

The Fed has reviewed banks’ costs every two years since 2011, as required by the Durbin Amendment, but has not adjusted its regulations to keep fees proportional as costs have fallen, despite repeated concerns voiced by NRF and other retail groups, according to the suit.

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