WASHINGTON Aug 14 A U.S. judge postponed
throwing out a controversial cap on debit card "swipe fees" and
gave the Federal Reserve one week to take a position on whether
to write an interim rule to replace the fee cap.
In late July, Judge Richard Leon of the U.S. District Court
for the District of Columbia ruled that the Fed had improperly
capped the interchange, or swipe, fees that retailers pay to
banks when customers use debit cards to make purchases.
He said in that ruling that the Fed disregarded the
intentions of Congress, which called for limiting the fees as
part of the 2010 Dodd-Frank financial reform law, by setting the
cap too high.
It was unclear at the time whether the current cap of 21
cents per transaction would remain temporarily in place while
the Fed crafted a new fee limit. On Wednesday, the judge
postponed throwing out the Fed's rule for a week.
He said the Fed should determine whether it could write an
interim final rule to replace the 21-cent cap and asked how long
that would take. An interim rule would take effect immediately
but could be adjusted later based on industry comments.
Leon criticized the Fed for not deciding quickly whether it
could do an interim rule and said the Fed's Board of Governors
would not have "the luxury" of taking its time. He asked them to
take a position on writing an interim rule by next Wednesday.
Dodd-Frank called for the cap on swipe fees to reduce
burdens on retailers and hopefully trickle down to consumers in
the form of lower prices. But when the Fed announced its cap,
retail groups protested that it let banks charge higher fees
than the law intended.
The National Retail Federation and other groups filed a
lawsuit to overturn the Fed's cap. The judge's ruling in their
favor two weeks ago dragged down shares of card companies Visa
Inc and MasterCard Inc.
Leon also said on Wednesday that the Fed and the retailers
should consider whether merchants should be compensated for
having been "overcharged" under the current rule.