WASHINGTON, July 31 A U.S. judge ruled on
Wednesday that the Federal Reserve ignored the intent of
Congress regarding a controversial cap on debit card "swipe
fees" that are part of a dispute between banks and retailers.
The 2010 Dodd-Frank law called for the Fed to cap such
fees, which banks charge to retailers when their customers use
debit cards to make purchases.
Judge Richard Leon of the U.S. District Court for the
District of Columbia sided with retailers, who argued the Fed's
21 cent cap was higher than Congress intended.
"The Board has clearly disregarded Congress's statutory
intent by inappropriately inflating all debit card transaction
fees by billions of dollars and failing to provide merchants
with multiple unaffiliated networks for each debit card
transaction," Leon wrote in his ruling.
The so-called Durbin amendment to Dodd-Frank, named for its
sponsor, Democratic Senator Richard Durbin of Illinois, was
intended to reduce burdens on retailers and hopefully trickle
down to consumers in the form of lower prices.
The amendment called on the Fed to consider certain costs to
banks of providing debit cards when it set the fee cap. It was
praised by retailers, but aggravated banks, which said they
might have to charge consumers extra for debit cards to make up
for the lost revenue.
But when the Fed announced its cap, which was higher than
the regulator initially proposed, retail groups protested that
it let banks charge higher fees than the law intended.
The National Retail Federation and other groups said the Fed
inappropriately bowed to pressure from financial industry
lobbyists and looked at bank costs beyond those the Durbin
amendment directed it to consider.
The retail group on Wednesday applauded the judge's decision
to throw out the Fed's rule.
"From the very beginning, retailers and restaurants knew the
Federal Reserve Board of Governors had grossly misapplied the
swipe fee law," Mallory Duncan, general counsel at the National
Retail Federation, said in a statement after the ruling.
"They failed to heed Congress' call to set fee standards
that were 'reasonable' and 'proportional' to the actual cost of
a transaction," Duncan said.
The head of a banking group warned of "even more chaos ahead
for consumers and small banks."
"Congress ought to save families from this uncertainty by
repealing this government mandated price-fixing," Richard Hunt,
president of the Consumer Bankers' Association, said in a
A spokeswoman for the Fed declined to immediately comment on