The National Retail Federation (NRF) told the U.S. Supreme Court that the debate over debit card swipe fees is “of staggering importance” and asked the justices to review a ruling that left the Federal Reserve’s cap on the billions of transactions conducted each year at 21 cents rather than reducing it to a lower level.
“There’s so much at stake here for U.S. retailers and their customers that we have no choice but to pursue this case as far as possible,” said NRF Senior Vice President and General Counsel Mallory Duncan. “When a federal agency blatantly disregards the clear intent of legislation passed by Congress and signed into law by the president, that’s a dispute that cannot be ignored.”
A petition asking the Supreme Court to consider the case was filed by NRF, the National Association of Convenience Stores, the Food Marketing Institute, the National Restaurant Association, NRF member Boscov’s Department Store, and NACS member Miller Oil Co., all of whom were plaintiffs in the original lawsuit.
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 that were “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 four 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.
While lower than the average of 45 cents before the cap was set, NRF argued that the 21-cent figure included costs that went beyond those allowed under the legislation and filed suit against the Fed in U.S. District Court in 2011 along with other retail groups.
In July 2013, Judge Richard Leon ruled in NRF’s favor and ordered the Fed to recalculate the cap at a lower level, but the Fed appealed. This 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.
“This case is of staggering importance,” the petition filed today said. “The economic burden of the (Fed’s) error will be felt virtually every time a consumer swipes a debit card.”
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.