WASHINGTON (6/4/14)--A group of retail merchants will take its case involving debit card interchange fees to the Supreme Court, Reuters reported Monday. The probable appeal represents the latest in the merchants' battle over the Federal Reserve Board's implementation of a debit card interchange fee cap required by a 2010 law.
Once requested, the merchants will then have to wait to see if the Supreme Court decides to hear the case, known as NACS v. Board of Governors of the Federal Reserve System.
An interchange fee, sometimes called a "swipe fee," occurs when a debit card transaction takes place. It goes to the financial institution that issued the card to pay for the cost of providing the card and the transaction services, including fraud protection.
The Dodd-Frank Wall Street Reform and Consumer Protection Act called for the cap on the fees, and required the Fed to implement it. In 2011, the Fed announced a cap at 21 cents per transaction for issuers with more than $10 billion in assets.
The Fed was subsequently sued by a group of merchants, who claimed the cap was too high. In July 2013, a U.S. District Court struck down the cap, but that decision was overturned in March by a three-judge panel of the U.S. District Court of Appeals.
The Credit Union National Association has advocated, along with a broad coalition of trade groups, that the cap is too low and filed an amicus brief in April 2012 that said the cap does not allow debit card issuers to cover their costs and a reasonable rate of return on their investments.
The joint brief described how small and large financial institutions are harmed by the Fed's tight fee ceiling. It underscored that consumers have not seen any pricing benefits for products and services promised by the merchants when they were fighting for a government-set cap on what card issuers may charge for their services.