Federal Reserve Embroiled in Lawsuit With Retailers - Other News

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Credit Card Applications » News » Other » Federal Reserve Embroiled in Lawsuit With Retailers

Federal Reserve Embroiled in Lawsuit With Retailers

Federal Reserve Embroiled in Lawsuit With Retailers
The content is accurate at the time of publication and is subject to change.

A lawsuit was filed in U.S. district Court in Washington, D.C., recently against the Federal Government. The suit is being brought against the Fed by the National Retail Federation, the National Association of Convenience Stores, the Food Marketing Institute and two individual retailers. They claim that the regulator didn`t uphold the law by setting interchange fees caps that are too high on debit card payment transactions. An interchange fee , often referred to as a “swipe fee”, is the amount of money banks are allowed to charge merchants per swipe for the processing of plastic payments.

In late June, the Fed established fee caps that would top out at an average of 24 cents per debit card transaction, just over half the previously unregulated interchange fee amount of 44 cents. The cap amount that was initially proposed was 12 cents per debit card swipe. Retailers are claiming that the Fed buckled under pressure applied by banking lobbyists in not mandating the proposed 12 cent cap.

The fact is that on occasion merchants now pay more in debit card transaction fees than they did prior to the Durbin Amendment regulation which took effect on October 1. Some of the plaintiffs in the case paid much less on average per debit card transaction than the current 24 cents.

“The Fed essentially didn`t fix the market as much as Mr. Durbin and the merchants thought they would,” claims Ed Mierzwinski, a consumer program director for the U.S. Public Interest Research Group, according to NPR.

“The Federal Reserve was required by law to come up with swipe fees that were ‘reasonable’ and ‘proportional’ but what we got were neither,” asserted National Retail Federation Senior Vice President Mallory Duncan in a statement, according to The Wall Street Journal.

Banks were against any fee cap at all. They claim that as it is, they will lose $7 billion in revenue annually as a result of Durbin. Consumers have suffered as banks have scrambled to recoup some of their loses – for example being subjected to higher account maintenance charges, higher minimum balance requirements and the elimination of debit card rewards programs.

The American Bankers have responded to the lawsuit by accusing retailers and merchants of not passing their swipe fee savings along to consumers. Their CEO Frank Keating denounced retailers for “seeking more profits from government price controls”, as reported by NPR.

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