Last week, the National Retail Federation, along with the Food Marketing Institute (FMI), the National Association of Convenience Stores (NACS), and two retailers, filed a lawsuit charging the Federal Reserve of failing to follow key swipe-fee requirements of The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, NRF’s Washington Retail Insight reported. The swipe fee reforms were included as part of the Durbin Amendment provisions of the Act, signed into law last July.
The groups believe the Federal Reserve adopted a “flawed cap” on debit card swipe fees, which took effect on October 1. NRF and the other groups argue the failure has allowed big banks to continue charging unjustifiably high swipe fees and has discouraged price competition among credit card networks, the WRI explained.
The suit, filed in federal court, states that the regulations have also brought about an increase in swipe fees for some “small-ticket” purchases. The Federal Reserve said in December 2010 that it had determined that it costs banks an average of four cents to process a debit transaction, and proposed that the fees be capped at no more than 12 cents per transaction — triple the banks’ actual cost. WRI reported that, after lobbying by banks and the card industry, final regulations adopted in July 2011 set the cap at more than five times the actual cost — 21 cents plus 0.05 percent of the transaction and, in most cases, an additional one cent for fraud prevention.
Compounding matters, both Visa and MasterCard announced recently that they would charge the maximum amount even on small-ticket transactions that the card industry previously processed profitably for as little as six to eight cents. “Congress passed this law to cap swipe fees but the banks have turned a ceiling into a floor and raised fees dramatically higher for quick-service restaurants across the nation,” NCCR Executive Director Rob Green told WRI. “This clearly was not the intent of Congress.”