WASHINGTON The Federal Reserve and merchants challenging the Fed’s Durbin amendment caps on swipe fees asked the D.C. Circuit Court of Appeals to expedite the Fed’s appeal of a lower court ruling invalidating the cap as too high.
The merchants group, which is headed by the National Association of Convenience Stores, told the appeals court that “every day that passed under the Final Rule potentially causes them significant and irreparable injury.”
The Fed agreed for the need for a quick resolution, telling the court that “delay in resolving its appeal will result in irreparable harm to the Board, the public, and participants in the debit card system.”
NACS and other merchants sued the Fed after last year’s enactment of the Durbin amendment caps, which limited interchange, or swipe fees, paid to credit unions and banks with more than $10 billion in assets at around 21 cents per transaction, or less than half the average 44 cents they had been earning. The merchants claim the Fed set the cap too high because it included costs that were not permissible under the Durbin amendment to the Dodd-Frank Act, such as fraud losses. The lower court agreed and ordered the Fed to recalculate the cap at a lower rate.
The Fed is appealing that decision, saying the court’s reading of the Durbin amendment was not compelled by Congress. “To the contrary,” wrote the Fed, “the Board believes that its interpretation of the statute is consistent with both the text and purpose of the statute, is eminently reasonable, and is therefore entitled (to deference as a federal regulator).”
“Expedition of the (Fed’s) appeal would minimize the potential for any harms to third parties, such as Merchants, if the district court decision is affirmed on appeal,” said the Fed in its motion.
Credit unions and banks of all sizes fought the Durbin amendment as it limits the amount of revenue they can earn from merchants on debit transactions. Debit interchange has become a major profit center for credit unions and banks, especially as growing numbers of consumers opt for debit over credit. Credit unions and banks earned an estimated $6 billion in total debit fees in 2012, even after enactment of the cap.
