NRF Opposes Supreme Court Decision on Swipe Fees
The National Retail Federation has expressed disappointment at the U.S. Supreme Court’s announcement that it would not review an appellate court ruling on whether the Federal Reserve set a 2011 cap on debit card swipe fees higher than the level sought by Congress in legislation passed the year before.
“The court’s decision is disappointing because it leaves merchants and their customers paying far more than intended by Congress,” NRF Senior Vice President and General Counsel Mallory Duncan said. “Federal agencies have flexibility in implementing our nation’s laws, but do not have the discretion to blatantly ignore the wishes of elected officials and the clear language of the statute. The court’s ruling means retailers will keep paying billions of dollars more than they should, and that fee-hungry banks will continue to rake in unearned profits that ultimately come out of consumers’ pockets. We will continue to press the issue.”
“Banks will benefit from this ruling but the battle over swipe fees isn’t over,” Duncan said. “There is still litigation pending on credit card swipe fees, and policymakers continue to be concerned by the anti-consumer and anti-competitive practices of the card industry.”
The court turned down a petition asking the justices to review the case. The petition was filed in August by NRF, the National Association of Convenience Stores, the Food Marketing Institute, the National Restaurant Association, NRF member Boscov’s Department Store, and NACS member Miller Oil Co., all of whom were plaintiffs in the original lawsuit.
Under the Dodd-Frank Consumer Protection and Wall Street Reform Act of 2010, the Federal Reserve was required to adopt regulations that would result in debit swipe fees that were “reasonable and proportional” to the actual cost of processing a transaction. Incremental costs of authorizing, clearing and settling each transaction were allowed to be considered but fixed costs were not. Federal Reserve staff calculated the average incremental cost at 4 cents per transaction and initially proposed a cap no higher than 12 cents, but the Federal Reserve Board of Governors eventually settled on 21 cents after heavy lobbying from the financial services industry.
While lower than the average of 45 cents before the cap was set, NRF argued that the 21-cent figure included costs that went beyond those allowed under the legislation and filed suit against the Fed in U.S. District Court in 2011 along with other retail groups. In July 2013, Judge Richard Leon ruled in NRF’s favor and ordered the Fed to recalculate the cap at a lower level, but the Fed appealed. In March 2014, the U.S. Court of Appeals for the District of Columbia overturned Leon’s ruling, citing “ambiguity” in the 2010 law and saying the Fed based the cap on a “reasonable interpretation” of the measure.
Last August’s petition argued that the Circuit Court made a number of legal errors and “bent over backward to find ambiguity” in Dodd-Frank while ignoring the ‘text, structure and purpose” of the law.
“The court’s decision is disappointing because it leaves merchants and their customers paying far more than intended by Congress,” NRF Senior Vice President and General Counsel Mallory Duncan said. “Federal agencies have flexibility in implementing our nation’s laws, but do not have the discretion to blatantly ignore the wishes of elected officials and the clear language of the statute. The court’s ruling means retailers will keep paying billions of dollars more than they should, and that fee-hungry banks will continue to rake in unearned profits that ultimately come out of consumers’ pockets. We will continue to press the issue.”
“Banks will benefit from this ruling but the battle over swipe fees isn’t over,” Duncan said. “There is still litigation pending on credit card swipe fees, and policymakers continue to be concerned by the anti-consumer and anti-competitive practices of the card industry.”
The court turned down a petition asking the justices to review the case. The petition was filed in August by NRF, the National Association of Convenience Stores, the Food Marketing Institute, the National Restaurant Association, NRF member Boscov’s Department Store, and NACS member Miller Oil Co., all of whom were plaintiffs in the original lawsuit.
Under the Dodd-Frank Consumer Protection and Wall Street Reform Act of 2010, the Federal Reserve was required to adopt regulations that would result in debit swipe fees that were “reasonable and proportional” to the actual cost of processing a transaction. Incremental costs of authorizing, clearing and settling each transaction were allowed to be considered but fixed costs were not. Federal Reserve staff calculated the average incremental cost at 4 cents per transaction and initially proposed a cap no higher than 12 cents, but the Federal Reserve Board of Governors eventually settled on 21 cents after heavy lobbying from the financial services industry.
While lower than the average of 45 cents before the cap was set, NRF argued that the 21-cent figure included costs that went beyond those allowed under the legislation and filed suit against the Fed in U.S. District Court in 2011 along with other retail groups. In July 2013, Judge Richard Leon ruled in NRF’s favor and ordered the Fed to recalculate the cap at a lower level, but the Fed appealed. In March 2014, the U.S. Court of Appeals for the District of Columbia overturned Leon’s ruling, citing “ambiguity” in the 2010 law and saying the Fed based the cap on a “reasonable interpretation” of the measure.
Last August’s petition argued that the Circuit Court made a number of legal errors and “bent over backward to find ambiguity” in Dodd-Frank while ignoring the ‘text, structure and purpose” of the law.