During a hearing Wednesday, U.S. District Judge Richard Leon suggested that the Federal Reserve Board set a cap on swipe fees too high under the Durbin Amendment, a provision in the Dodd-Frank Act, and stated banks might be forced to rebate potentially billions of dollars to merchants in "overcharges."

Under a 2011 rule, payment networks can set fees at roughly 24 cents per transaction, but the judge said they should be 12 cents or less.

Legal experts say the court lacks the authority to enact such an order.

"Assuming that the Durbin Amendment does not expressly confer authority to impose retroactive liability, the Fed cannot now adopt a rule that makes banks return what they charged for past transactions," said Ronald Levin, a law professor at Washington University.

For the full piece see "Judge's Threat of Swipe-Fee Rebates Likely Hollow" (may require subscription).