The federal Court of Appeals for the District of Columbia must decide whether U.S. District Court Judge Richard Leon erred in ruling that the Fed had ‘clearly disregarded” Congress’ intent ‘by inappropriately inflating all debit card transaction fees by billions of dollars.”
The judge also said financial institutions must enhance competition by providing retailers with more choices to process debit-card transactions.
The Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act that Congress passed in 2010 requires the Federal Reserve set a reasonable limit on what financial institutions can charge for debit transactions.
Instead, the Federal Reserve, according to Judge Leon’s ruling, continued to let financial institutions charge exorbitant amounts that far surpassed their costs. While it costs less than 2 cents to process more than 90 percent of debit-card transactions, the Fed in enforcing the Durbin Amendment let financial institutions charge more than 21 cents.
Those higher costs, of course, make purchases more expensive for consumers.
Merchants sued the Federal Reserve and in July the judge ruled that the Fed had violated the Durbin Amendment.
The amendment, the judge said in his ruling against the Fed, ‘is clear with regard to what costs the board may consider in setting the interchange fee standard.”
The Merchants Payments Coalition, a group of merchants fighting for a more competitive and transparent bank-card industry, said today: ‘Judge Leon struck a blow for fairness with his original ruling. We think the evidence will also prove as compelling to the appeals court.
‘We look forward to that court reaffirming the Durbin Amendment as passed and sending the Federal Reserve back to the drawing board to ensure it actually follows the law.”
The case was brought by members of the Merchants Payments Coalition: the Food Marketing Institute, National Association of Convenience Stores, National Restaurant Association and National Retail Federation with Boscov’s Department Stores and Miller Oil Co.