On Friday, The U.S. Appeals Court for the District of Columbia overturned a lower court’s decision in July that favored the merchants and was a setback for the banks.
This decision keeps debit card interchange rates at their current levels.
Retail associations, including the National Retail Federation, the National Association of Convenience Stores and the Retail Industry Leaders Association, were quick to speak out on the decisions.
The National Association of Convenience Stores (NACS) issued the following statement from NACS President and CEO Henry Armour following the ruling:
“It is unfortunate that the D.C. Circuit Court of Appeals misread the law and the Federal Reserve’s rule on debit swipe fees. Any rule that would allow profit margins of more than 1,000% and raise fees on many transactions clearly violates the letter and intent of the law Congress passed,” said NACS President and CEO Henry Armour. “Congress did the right thing by trying to make debit swipe fees more competitive and the law did that in spite of the Fed’s mistakes. We intend to review all of our options for upholding what Congress did and ensuring that debit swipe fees become more reasonable for convenience retailers and their customers.”
“Friday’s decision reverses the ruling handed down last summer by U.S. District Court Judge Richard Leon, who said that that the Federal Reserve clearly disregarded Congress’s intent by inappropriately inflating all debit card transaction fees by billions of dollars, which have continued to allow financial institutions to charge exorbitant fees that are ultimately born by consumers. In January, attorneys representing NACS urged the U.S. Court of Appeals for the District of Columbia Circuit to uphold Leon’s decision,” the statement concluded.
The National Retail Federation (NRF) noted, “ NRF is disappointed and remains confident that the Federal Reserve erred when it set the swipe fee cap far higher than intended by Congress,” said NRF Senior Vice president and General Counsel Mallory Duncan. “The Fed ignored congressional intent and worked to shield debit card companies and big banks. A self-described victory for the banks usually results in higher costs for consumers.”
“We are disappointed with the court’s unnecessarily narrow reading of important bipartisan reforms that Congress enacted to lower fees borne by merchants and consumers in debit card transactions,” said Deborah White, Retail Industry Leaders Association (RILA) General Counsel. “The Federal Reserve regulations at the heart of the case fell well-short of the mark to achieve Congress’s goal. The court’s ratification of this ‘half a loaf’ approach deprives merchants and consumers of the savings that Congress intended. Nonetheless, the fight against the Visa/MasterCard duopoly transcends any single judicial decision and we will continue the effort to bring fairness and competition to the broken debit and credit markets.”
RILA noted that it was not a party to the case. “The Retail Litigation Center, directed by the chief legal officers of the country’s leading retail companies, filed an amicus brief on the Federal Reserve’s interpretation of the exclusivity provisions of the law,” the association said in a statement. “Debit swipe fee reform, passed by Congress in 2010, required the Federal Reserve to ensure that the fees charged to merchants that accept debit cards be ‘reasonable and proportionate’ to the cost of the transaction. The law exempted 99% of all banks and applied only to those banks with more than $10 billion in assets. In 2010, after aggressive lobbying by Visa, MasterCard and the biggest banks, the Federal Reserve capped debit swipe fees for non-exempt institutions at roughly 24 cents, more than three times higher than the cap it had proposed just months before and more than five times higher than the Federal Reserve found such transactions to cost. In July 2013 the U.S. District Court ruled that the implementation rules for debit swipe fee reform established by the Federal Reserve were inconsistent with the intent of the law.”