WASHINGTON — The National Retail Federation, Boscov’s Department Store LLC and four other plaintiffs filed a petition for a Writ of Certiorari against the Federal Reserve’s Board of Governors on Monday, asking the Supreme Court to hear a case involving the debit card swipe fees that banks charge retailers when customers use the cards.
The retailers and industry groups are asking the justices to review a ruling by the U.S. Circuit Court of Appeals in March that overturned a lower court decision and let stand the Federal Reserve’s cap of 21 cents on debit card transactions.
The other plaintiffs in the case include the NACS, the Food Marketing Institute, the National Restaurant Association and Miller Oil Co.
“There’s so much at stake here for U.S. retailers and their customers that we have no choice but to pursue this case as far as possible,” said Mallory Duncan, senior vice president and general counsel at the NRF.
Congress passed legislation in 2010, known as the “Dodd-Frank Consumer Protection Act,” which set sweeping financial regulations and also directed the Federal Reserve to adopt new rules governing debit card fees. The legislation directed the Fed to set debit fees that were “reasonable and proportional” to the actual cost of processing a transaction. The Fed determined that the average incremental processing cost was 4 cents a transaction and initially set the cap on fees a bank could charge a retailer at a maximum of 12 cents a transaction. But in its final regulation issued in October 2011, the Fed increased the limit and set the cap at 21 cents a transaction.
“When a federal agency blatantly disregards the clear intent of legislation passed by Congress and signed into law by the President, that’s a dispute that cannot be ignored,” Duncan said.
An NRF spokesman said retailers believe the Fed “simply caved into the lobbying from the banking industry. We can’t see any other justification for having set the fee as high as they set it.
“The number that the Fed settled on was almost twice as high as what it had proposed and was five times higher than what they said the actual cost was,” the NRF spokesman said.
Retailers claim that they pay an estimated $20 billion on debit fee transactions annually. The average fee they paid before the cap was set was about 45 cents a debit card transaction.
A study found that retailers would save $8.5 billion with a 21-cent cap but could reap $12.5 billion in savings if the limit on fees per debit card transactions were set much lower.
The NRF, Boscov’s and the other plaintiffs in the Supreme Court Case filed a lawsuit in U.S. District Court in 2011 against the Fed, arguing that the 21-cent cap “went beyond those allowed under the legislation.” In July 2013, a U.S. district court judge ruled in favor of the NRF and other plaintiffs and ordered the Fed to recalculate the cap at a lower level, but the Fed appealed to the U.S. Circuit Court of Appeals in Washington and won.