On January 20, the U.S. Supreme Court declined to take up a challenge by retailers to the Federal Reserve’s controversial rules for debit card “swipe fees,” effectively ending their fight over the Dodd-Frank Act’s Durbin amendment. The court’s rejection of the appeal means a March 2014 ruling by the U.S. Court of Appeals for the District of Columbia Circuit that upheld the rules stays intact.
The petition for certiorari was filed by the convenience store industry group NACS, the National Retail Federation, and other industry groups in an attempt to overturn the swipe fee rules – which allow regulations that establish a cap of 21 cents plus an adjustment for fraud losses of 0.05 percent of the transaction value on all debit card transactions. The Supreme Court’s decision to avoid ruling on the swipe fee rules brings to a close a dispute involving retailers, the Fed, and the banking industry dating back to 2011, when the Fed revised its implementing regulations.
In July 2013, U.S. District Judge Richard J. Leon vacated the Durbin amendment implementing rules, agreeing with the retailers that lawmakers intended the cap to be lower. The court found that the Fed crafted a rule that was too broad in defining what costs could be included in the limit and did not give merchants more options when choosing payment networks to process transactions. On appeal in March 2014, the D.C. Circuit reversed that ruling, holding that the Fed had reasonably interpreted Congress’s intent with its 2011 final rule limiting swipe fees.
Richard Hunt, head of the Consumer Bankers Association, said the Supreme Court’s action Tuesday showed that “reasonable minds have prevailed.”
Hunt said government-mandated price controls like the Durbin Amendment “have yet to work as advertised, and retailers still have not proved savings have been passed on to consumers.
“Make no mistake about it – consumers must come first in this process, not the bottom-line of retailers. This drawn-out fight should put on notice those members of Congress who insist upon interfering with the free market,” Hunt added.