Judge Urges Federal Reserve To Act Quickly On New Swipe Card Rules

By Sam Lewis

Refunding excess fees is also an issue at hand

Last month, U.S. District Court Judge Richard Leon ruled that the Federal Reserve refused to abide by Congress’ instructions of the 21 cent cap on debit card swipe fees charged by the largest banks in the U.S. The new cap was a significant reduction from the original 45 cents per transaction previous to the 2010 swipe reform guidelines. Leon ruled that the 45 cents per debit transaction was too high, and the fee went beyond banks’ “reasonable” and “proportional” costs of processing transactions.

On Tuesday, August 14, Judge Leon insisted the Federal Reserve move quickly on setting new regulations regarding the reduction of debit card swipe fees. He would also like to consider if banks should repay millions of dollars they collected from retailers under the swipe fee guidelines he struck down in July. The Federal Reserve has 60 days to decide to appeal the ruling. But at Tuesday’s hearing, Leon told Associate General Counsel Katherine Wheatley he would like the agency to move ahead with new regulations.

“I appreciate your right to appeal, but I’m not going to sit around and do nothing for 60 days,” Leon said. Leon did not set a deadline, but a hearing was scheduled for August 21, where he expects the Federal Reserve to take a stand on the proposal, and see progress being made on interim regulations. Leon said he expects interim guidelines to be completed by October’s end, and they will be effective immediately following their completion.

As far as the refunds to merchants issue is concerned, Leon gave a deadline of September 16 for briefings on the excess amounts collected in swipe card fees since the cap was instated in October of 2011. Leon is adamant about making progress in this legislation. “We’re not putting a man on the moon,” he said to Wheatley. “You have a board. They can have a conference call. They can come from where they are on vacation. They’re not going to have the luxury of sitting around for weeks.” To which Wheatley countered, “The Board has no interest in dragging its feet.”

Shannon Coffin, an attorney representing NRF and other retail groups, advises the Federal Reserve to act quickly in revising the cap as they already have a head start on the project. Documentation already exists from the original cap where the Federal Reserve created the initial proposal — a 7- to 12-cent cap — from scratch, in less than six months. The issues at hand affect millions of retail entities and billions of dollars. The final ruling of Judge Leon will play a substantial role on the economy as well as retailers who have dealt with excess swipe fees for quite some time.