WASHINGTON A federal judge on Wednesday admonished the Federal Reserve for what he saw as foot-dragging on new rules to set debit fees under the Durbin amendment.
The judge gave the Fed and attorneys for retailers, credit unions and banks a Sept. 16 deadline for briefs on whether merchants should be reimbursed for excess amounts of swipe fees that have been collected since the cap took effect in October 2011.
“This is a large-scale matter affecting millions of entities and billions of dollars,” said Judge Richard Leon, who struck down the 2011 Fed debit caps because he found they were too favorable to card issuers and Visa and MasterCard. While credit unions, banks and card firms could fight any type of reimbursement effort, it could be a windfall for merchants, who could regain millions of dollars or more if such a push was successful.
In last months’ ruling Judge Leon said the cap was too high because the Fed included expenses that went beyond credit unions’ and banks’ “reasonable” and “proportional” costs of processing debit transactions as allowed by Congress under the Durbin amendment to the 2010 Dodd-Frank Act.
Leon has asked lawyers from both sides of the case to come up with ways to make financial services companies reimburse businesses for what he calls “overcharges.” That would be the difference between what the Fed’s swipe fee limits have been since Oct. 1, 2011 and what they should have been based on the Durbin amendment requirement that debit fees be “reasonable and proportional to the cost incurred by the issuer.”
Yesterday Judge Leon said he expects interim regulations to replace the current Durbin amendment caps to be completed by the end of October, and that they should go into effect while comments are accepted and reviewed.
The judge scheduled a hearing for Aug. 21 for the Fed to state its position on the proposal and to say how soon interim regulations could be put in place.
Judge Leon also criticized Federal Reserve Board members for being “out making speeches” while businesses and consumers faced what he sees as inappropriately inflated fees. Board members need to “rule expeditiously,” he said.
The judge also took aim at the general lack of urgency in the federal rule-making process. “We’re not putting a man on the moon here,” he said.
Last month’s ruling was in a lawsuit filed by a coalition of trade groups representing retailers, restaurateurs, service station owners and convenience store operators after the new limits went into effect Oct. 1. 2011, saying the financial services lobby pressured the Fed into allowing higher fees than the law intended.
