More than four years after the Dodd-Frank banking reforms directed the Federal Reserve to set a standard for swipe fees — the money charged to retailers by banks for each debit card transaction — the hotly debated issue appears to have hit a dead-end with the U.S. Supreme Court deciding this morning to not hear an appeal from retailers who contend the Fed set the fees too high.
Let’s just go back a bit for context. In 2010, the average swipe fee was around $.44 per transaction. In Dodd-Frank, Congress directed the Fed to look at the actual costs for banks to process a debit card transaction and come up with a swipe fee standard that forbids banks from using these fees to recover costs “which are not specific to a particular electronic debit transaction.”
The Fed’s initial proposal slashed the fee all the way down to $.12/transaction, but blowback from the financial world ultimately resulted in a compromise of $.21/transaction. Over the angry voices of retailers, the fee took effect in 2011, leading to legal action from the National Retail Federation, convenience-store trade group NACS, the National Restaurant Association, and others.
In July 2013, a federal court sided with the retailers, saying that the Fed “clearly disregarded Congress’s statutory intent by inappropriately inflating all debit card transaction fees by billions of dollars.”
However, since $.21/transaction is still better than $.44/transaction, the fee limit remained in place while the case continued to make its way through the court system.
Last March, a federal appeals court overturned the lower court ruling, saying that it believed the Fed had acted reasonably in setting the $.21 fee.
“Congress directed the Board to issue rules that would accomplish a particular objective, leaving it to the Board to decide how best to do so,” reads the 2014 appeals court ruling, “and the Board’s rule seems to comply perfectly with Congress’s command.”
And because no legal matter that leaves billions of dollars on the table is truly resolved until it’s either been heard or turned away by the Supreme Court, the retailers petitioned the court [PDF] in August.
Even though the petition was later supported by amicus briefs filed by such retail heavy-hitters as Walmart, 7-Eleven, Wendy’s, Starbucks and Arby’s — along with U.S. Senator Dick Durbin — the Supremes decided this morning to deny the petition without comment.
“The court’s decision is disappointing because it leaves merchants and their customers paying far more than intended by Congress,” National Retail Federation Senior Vice President and General Counsel Mallory Duncan said in a statement. “Federal agencies have flexibility in implementing our nation’s laws, but do not have the discretion to blatantly ignore the wishes of elected officials and the clear language of the statute. The court’s ruling means retailers will keep paying billions of dollars more than they should, and that fee-hungry banks will continue to rake in unearned profits that ultimately come out of consumers’ pockets. We will continue to press the issue.”
by Chris Morran via Consumerist