The National Restaurant Association said it joined a lawsuit against the Federal Reserve, claiming that it failed to follow Congress’ intent regarding the amount that banks could charge retailers for accepting debit cards.
The lawsuit argues, among other things, that the Fed’s final rule on debit-card swipe or interchange fees set the rate at a higher level than Congress had intended when it passed the Durbin Amendment in 2010.
The legislation gave the Fed the power to regulate fees for debit cards and directed that it ensure they are “reasonable and proportional” to the cost of processing transactions.
Last June, the Fed said it would limit the fees that banks can charge operators and retailers to 21 cents per transaction, higher than its initial proposed cap of about 12 cents per transaction. Previously, businesses had been paying an average of 44 cents per transaction.
As a result of the ruling, major credit card companies said they would increase the interchange fees to the Federal Reserve’s limit on small-ticket transactions of $15 or less.
The NRA maintains that this hike in fees will damage small businesses with high small-ticket volumes, like quick-service restaurants.
“While the Federal Reserve’s rule significantly brought down debit swipe fees for many merchants, some small businesses will pay higher fees on smaller ticket transactions — evidence that the Fed provided card networks like Visa and MasterCard too much latitude to increase rates well above a reasonable and proportional level,” said Scott DeFife, executive vice president of Policy and Government Affairs for the NRA.
“Allowing higher fees on small-ticket bills was not the intent of Congress, and the Federal Reserve must reconcile this failure to comply with the law as intended.”
In addition, the lawsuit contends that the Fed’s final rule does not promote price competition among card networks that would help decrease network fees. The suit claims the law was meant to create “a competitive market dynamic between networks, such as Visa and MasterCard, to keep costs down.”
As it stands, the Fed’s rule will not spur competition on signature debit routing and only limited competition — if any — on PIN transactions, the suit argues.
The NRA joins the Food Marketing Institute, the National Association of Convenience Stores, the National Retail Federation, Boscov’s Department Store and Miller Oil Co. in the suit.
Contact Paul Frumkin at paul.frumkin@penton.com.