Supreme Court agrees to hear debit card ‘swipe fees’ case

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The Supreme Court agreed Friday to take up a case asking the Federal Reserve to lower the cap on debit card “swipe fees.”

An amendment by Sen. Dick Durbin (D-Ill.) to the 2010 Dodd-Frank Act directed the Fed to set a “reasonable” cap on fees that banks charge merchants each time a customer swipes a debit card. Those fees must also be “proportional” to banks’ costs.

Implemented in 2011, the Fed capped fees for financial institutions with $10 billion or more in assets at 21 cents, with an additional 1 cent for fraud prevention and 0.05 percent for fraud recovery.

The Supreme Court agreed to hear an appeal brought by the Corner Post, a North Dakota-based truck stop and convenience store, challenging the Fed’s cap on debit card swipe fees. 

The Corner Post joined the North Dakota Retail Association and the North Dakota Petroleum Marketers Association in the original 2021 case in the U.S. District Court in Bismarck.

The plaintiffs argued the cap set was higher than the one Congress intended. The Fed originally proposed a 12 cent cap, but said it raised that cap after considering all industries impacted.

“Banks’ costs of processing transactions have fallen dramatically, and these fees continue to drive up costs for merchants and prices for consumers,” Stephanie Martz, National Retail Federation (NRF) chief administrative officer and general counsel, said in a statement. Martz was initially co-counsel on the case.

“Retailers are now paying twice as much as they should if the Fed had followed the law. If the Fed isn’t going to act on its own, the courts need to enforce the law.”

The NRF, which is not a party in the case, celebrated the Supreme Court’s decision. It’s also championing Durbin’s latest bill that could bring down credit card swipe fees.

The Credit Card Competition Act would require financial institutions with more than $100 billion in assets to offer at least two network options to process credit card transactions. One of those networks has to be an option other than Visa and Mastercard, which dominate the U.S. credit card network market.

Visa and Mastercard are among the financial institutions and credit unions represented by the Electronic Payment Coalition, which is vigorously opposing Durbin’s bill.

The coalition has pointed to the decision to cap debit card fees as an example of why Congress should not impose similar restrictions on credit cards.

“We believe that Durbin debit was a complete failure,” EPC Executive Director Aaron Stetter told The Hill in a previous interview, citing a 2015 Richmond Fed study that found the vast majority of merchants did not pass on those savings to customers in the form of lower prices.

EPC did not immediately return The Hill’s request for comment.

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