July 31, 2013

Court overturns Fed's debit-fee rule

July 31, 2013 – A federal district court today upheld merchants' claim that the Federal Reserve Board failed to carry out federal statutory requirements on debit interchange fees in its final rule implementing those provisions.

The court said the current rules stand until the Fed produces new rules; there will be a briefing on how long that should be.

In today's ruling, the U.S. District Court for the District of Columbia said the Fed "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." The court granted the motion by merchant groups, including the National Retail Federation and others, that the Fed's rule setting standards on debit-card interchange fees and network exclusivity prohibitions be overturned.

The debit interchange requirements were laid out in the Durbin amendment that was added to the Dodd-Frank Act before final passage. The court said "the text and structure of the Durbin Amendment, as reinforced by its legislative history, are clear with regard to what costs the Board may consider in setting the interchange fee standard: Incremental [authorization, clearing and settlement] costs of individual transactions incurred by issuers may be considered."