WASHINGTON A federal judge Friday agreed to keep in place the 2011 rules enacting the Durbin amendment’s cap in debit fees while the D.C. Circuit Court of Appeals reviews whether the Federal Reserve violated the intent of Congress in setting the rules.
Both the Fed and merchants who are seeking to overturn the rules had asked D.C. District Court, which had ruled them invalid, in place pending the appeal.
“Upon consideration of those pleadings, oral arguments and the entire record, I conclude that the stay should remain in place while our Circuit Court reviews my decision,” U.S. District Judge Richard Leon wrote in his ruling.
Merchants “vastly prefer the status quo” to the “unregulated free for all’ which likely would subject merchants to interchange fees “well in excess of the Fed’s current standard,” said lawyers in a brief filed with the court.
The Fed is seeking to reverse Leon’s ruling that it wrongly set the cap on debit-card transaction fees by taking into consideration fraud expenses and other costs while setting the cap for credit unions and banks with more than $10 billion in assets at about 21 cents for each transaction, and neglected to bolster competition among payment networks.
Prior to the cap, credit unions and banks earned about 44 cents per transaction, but Leon’s ruling, unless overturned, could lower the cap even more.
