The Supreme Court rejected Tuesday a challenge from retailers and merchants to lower the Federal Reserve’s cap on debit card fees.
The court’s decision not to take up the case is the latest twist in a long-running lobbying battle between retailers and banks over so-called “swipe fees” paid to card issuers by retailers for transactions.
The suit, National Association of Convenience Stores v. Board of Governors of the Federal Reserve System, was filed by a coalition of industry groups for retailers, restaurants, convenience stores, gas stations and other businesses that have high volumes of card transactions.
The Federal Reserve was required to write regulations setting a ceiling on swipe fees by an amendment authored by Sen. Dick Durbin, D-Ill., to the 2010 Dodd-Frank financial reform law.
Initially, the central bank proposed a 12 cent-per-transaction cap, effectively halving the average fee. But after fierce lobbying by card issuers, the rule was finalized with a 21-cent ceiling in June 2011.
A broad coalition of retailers had sought to force the Fed to revise its rule-making to lower the cap, saying that the rule failed to follow the text of the law and left retailers forced to pass the costs of the card fees on to consumers.
“It is unfortunate that the Supreme Court would not hear about the legal problems with the Federal Reserve’s debit swipe fee rules,” said Lyle Beckwith, a senior vice president for the National Association of Convenience Stores. Beckwith added that nonetheless, “the Fed should now see error of its ways and revise its rules to correct the gross deficiencies in them.”
At stake is roughly $16 billion annually in fees. Critics of the regulation, including those from the banking industry, have claimed that banks have been forced to charge extra on bank accounts to make up for the lost revenue from swipe fees.
“The Supreme Court has reached the right result today,” said Frank Keating, head of the American Bankers Association, “but we shouldn’t lose sight of the fact that the underlying policy — the Durbin Amendment — has not accomplished its goal of lowering prices for consumers.
“At the end of the day, American consumers have paid the price for the efforts of big-box retailers to line their pockets at their own customers’ expense,” Keating added in a statement reacting to the Supreme Court’s decision not to take up the retailers’ challenge.
This article was originally posted at 11:25 a.m. and has been updated.
012015 Card Fees Case by Hoai Tran Bui
