Fed appeals ruling that banks make too much on debit-card fees
The Federal Reserve is hoping an appeals court will overturn a judge’s ruling that the Fed went too easy on big banks in 2011 when it limited the fees that merchants pay to have debit-card transactions processed.
The Fed announced the appeal in the closely watched case on Wednesday in a filing with U.S. District Judge Richard Leon in Washington.
Leon had ruled last month that the 21 cents-per-transaction cap, while lower than the previous charge of 44 cents, exceeded the limit Congress intended when it passed the 2010 Dodd-Frank financial reform law.
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Retailers had complained bitterly that the so-called interchange fees were too high. An amendment to the enormous Dodd-Frank legislation required the Fed to set the charges, colloquially called swipe fees, at a level reflecting the actual processing costs.
The Fed’s staff had earlier estimated those costs at 12 cents per transaction. But after protests by the banks, which stood to lose billions of dollars, the central bank raised the limit to 21 cents.
Leon had put the implementation of his ruling on hold to allow the Fed to appeal or to report back with a new approach. Both banks and retailers asked him Wednesday to keep that stay in place while the appeal is heard, according to news reports from the court. Leon did not say if he would do so.
The National Retail Federation, one of several merchant organizations involved in the litigation, said in a statement that it was “very disappointed to see the Fed giving in to the banks.”
An American Bankers Assn. press release said the Fed’s appeal “is the right thing to do.”
“We’re encouraged that all parties have asked for a stay and will seek an expedited appeal, which would avoid the market disruption and consumer harm that other alternatives would cause,” the banker trade group said.
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