Fed’s swipe fee rules rejected

On July 31, 2013, a US federal judge rejected a Federal Reserve rule related to the amount of money banks can take from retailers each time consumers swipe their debit cards. In 2011, the Fed implemented a roughly 21-cent cap per swipe, under regulations imposed by the Durbin Amendment of the Dodd-Frank Wall Street Reform Act. In the Judge’s decision, he stated that the Fed "clearly disregarded Congress’ statutory intent by inappropriately inflating all debit card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit card transaction."

The plaintiffs in the case, a group of retail associations including NACS, the Association for Convenience & Fuel Retailing, the Food Marketing Institute, the National Retail Federation, and the National Restaurant Association, applauded the ruling. They argued that they would be "substantially harmed" by those fees, as "the board’s final rule permits banks to recover significantly more costs than permitted by the plain language of the Durbin Amendment."

The cost to retailer’s bottom line of credit & debit card fees has continued to rise in recent years. On a retailer’s income statement, these fees have grown to become one the largest single expenses, trailing only labor and occupancy costs. In fact, based a survey conducted by Baker Tilly, retailers reported that these fees meet or exceed the bottom line profits of the company. According to NACS, total credit and debit card fees are more than 58% higher than total industry pretax profits. As a result, some retailers have begun to charge a fee for consumers that use credit cards.

While the cap will remain in place until new regulations can be set, this potential victory for the retail industry could ultimately result in lower fees for merchants and customers.