The U.S. Court of Appeals for the D.C. Circuit has overturned a lower court’s 2013 decision that would have rewritten the Federal Reserve’s rule for implementing the Durbin Amendment.
A federal appeals court reinstated a 2011 Federal Reserve rule on the fees banks can charge merchants when customers use their debit cards, a setback for retailers, writes the Wall Street Journal.
“It is unfortunate that the D.C. Circuit Court of Appeals misread the law and the Federal Reserve’s rule on debit swipe fees. Any rule that would allow profit margins of more than 1,000% and raise fees on many transactions clearly violates the letter and intent of the law Congress passed,” said NACS President and CEO Henry Armour. “Congress did the right thing by trying to make debit swipe fees more competitive and the law did that in spite of the Fed’s mistakes. We intend to review all of our options for upholding what Congress did and ensuring that debit swipe fees become more reasonable for convenience retailers and their customers.”
Friday’s decision reverses the ruling handed down last summer by U.S. District Court Judge Richard Leon, who said that that the Federal Reserve clearly disregarded Congress’s intent by inappropriately inflating all debit card transaction fees by billions of dollars, which have continued to allow financial institutions to charge exorbitant fees that are ultimately born by consumers. In January, attorneys representing NACS urged the U.S. Court of Appeals for the District of Columbia Circuit to uphold Leon’s decision.
U.S. Senator Dick Durbin commented on Friday’s ruling: “Today’s opinion by a panel of appellate judges is a giveaway to the nation’s most powerful banks and a blow to consumers and small businesses across America.” he said. “The court completely ignored how the Federal Reserve’s swipe fee rule allowed Visa and MasterCard to dramatically increase debit swipe fees on many small businesses, contrary to Congress’s clear language and intent. The court also astonishingly claimed that the swipe fee amendment was crafted in secret and at the last minute. If the court had taken the time to carefully read the law and its history they would have known the amendment was debated and approved on the Senate floor with a strong bipartisan majority months before enactment. Today’s ruling is both confused and tilted heavily towards the big banks and card giants.”