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* Justice reviewing banks, trade groups on debit fees
* Rep. Welch had called for antitrust probe
* Banks have since scrapped fee hikes amid public pressure
* Retail groups file suit against Fed over swipe fee cap
By Alexandra Alper
Nov 22 (Reuters) - The Justice Department is reviewing allegations by a U.S lawmaker that U.S. banks and their trade associations may have coordinated increases in debit card fees in violation of antitrust laws.
Assistant Attorney General Ronald Weich said in a letter released on Tuesday that the Department of Justice is taking a look at statements and actions by the banks and trade groups.
"Please be assured that if it finds that individuals, banks, or other parties may have violated the antitrust laws, the department will take appropriate action," Weich said in a Nov. 16 letter to Democratic Representative Peter Welch.
Welch in October called on the Justice Department to probe the banks.
He said public statements by big banks and trade groups -- including Wells Fargo and the American Bankers Association -- raised questions about whether financial companies have colluded on fee increases to make up for revenue lost because of a new cap on debit card "swipe fees".
That controversial cap on swipe fees, known as the Durbin amendment, went into effect on Oct. 1.
The cap is expected to cost banks $6.6 billion in annual revenue from debit card processing fees that banks charge retailers.
Banks initially defended the new debit card fees, saying they had to make up for lost revenue from retailers, but most scrapped them when faced with customer backlash.
"While big banks like Bank of America beat a hasty retreat on their debit card fee strategies, I have no doubt that they will continue their quest to dig deeper into the pockets of struggling consumers," Welch said in a statement on Tuesday. "They should be aware that there is a cop actively on the beat."
Bank of America , Wells Fargo and the ABA had no comment on the issue.
Separately on Tuesday, the National Retail Federation and other retail advocates filed suit against the Federal Reserve, which was tasked with setting the swipe fee caps under last year's Dodd-Frank Wall Street reform act.
In the lawsuit, filed in Washington D.C.'s U.S. district court, the NRF said the Fed bowed to pressure from banking industry groups and based its cap on costs banned from consideration by the law. The result, according to the group, is that banks are still charging unjustifiably high swipe fees.
"The Federal Reserve was required by law to come up with swipe fees that were 'reasonable' and 'proportional,' but what we got were neither," said NRF Senior Vice President Mallory Duncan.
Trish Wexler, a spokeswoman for the Electronic Payments Coalition, which has pushed hard against the swipe fee caps, disagreed, chocking the suit up to greed.
"Retailers won't truly be happy until they pay zero to accept cards," she wrote in an email.
A Federal Reserve spokesperson said, "We are aware of this lawsuit and we will be reviewing it."