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Appeals court upholds Fed’s debit card cap

Monday, March 24, 2014

A federal appeals court has today handed down a ruling in a back-and-forth drama that grew out of the 2010 Dodd-Frank Consumer Protection and Wall Street Reform Act. The ruling finds in favor of the Federal Reserve’s 2011 compromise, in which a 21-cent limit was put on debit swipe fees. That was down considerably from what had been the previous average of 44 cents per transaction.


The National Retail Federation, which has been deeply involved in this battle all along, immediately announced a statement, echoing its disappointment. 



“NRF is disappointed and remains confident that the Federal Reserve erred when it set the swipe fee cap far higher than intended by Congress,” NRF Senior Vice President and General Counsel Mallory Duncan said. “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.”


As a result of the Durbin Amendment provisions of Dodd-Frank, the Fed adopted rules that specified “reasonable and proportional” fees, based on actual costs involved. The Fed calculated the actual average cost at four cents per transaction and initially proposed a cap no higher than 12 cents, but eventually settled on 21 cents after what NRF calls “heavy lobbying from the financial services industry.” 



NRF appealed in 2011 and Judge Richard Leon ruled in NRF’s favour, and told the Fed to go back to the drawing board and do the calculations again. 


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