• Home
    Home We Serve America's Restaurants Representing nearly 500,000 restaurant businesses, we advocate for restaurant and foodservice industry interests and provide tools and systems that help members of all sizes achieve success.
  • Foundation
    Foundation Building & Retaining Talent The NRAEF is focused on developing a stronger workforce and building the next generation of industry leaders through education, scholarships and community engagement.
  • Show 2018
    Show 2018 May 19-22, 2018 As the international foodservice marketplace, the National Restaurant Association Show provides unparalleled opportunities for buyers and sellers to come together, conduct business and learn from each other.
  • ServSafe
    ServSafe Minimize Risk. Maximize Protection. For over 40 years, ServSafe® training programs have delivered the knowledge, leadership and protection that have earned the trust and confidence of business leaders everywhere.

National Restaurant Association - Durbin supports merchants' lawsuit against Federal Reserve

Skip to navigation Skip to content

News & Research

Share:
Email Print
News RSS

Durbin supports merchants' lawsuit against Federal Reserve

Sen. Richard Durbin (D-Ill.) recently filed a scathing friend-of-the-court brief in support of the National Restaurant Association and other merchant groups' lawsuit against the Federal Reserve Board.

In the brief, the senator agrees with the merchant groups that a Federal Reserve regulation doesn't agree with the intent of an element of financial reform known as "the Durbin Amendment."

The brief discusses several ways the regulation should be revised to meet the law. It also describes how the Fed mischaracterized Durbin's statements and intent.

The merchant groups' lawsuit, filed in November 2011, says the Federal Reserve failed to follow Congress' intent when the Fed issued regulations to curb debit-card swipe fees.

The Fed's rules, which took effect in October 2011, implement the NRA-supported Durbin Amendment. Congress passed the amendment in 2010 as part of the Dodd-Frank financial services reform bill. Durbin championed the measure, which aimed to contain merchants' escalating debit-fee costs by promoting more competition among major payment card networks and the banks that issue those cards.

The Durbin Amendment required the Fed to issue regulations to ensure debit-card swipe fees were "reasonable and proportional" to the cost of processing debit transactions.

The lawsuit aims to improve the Fed's rule, rather than stop its implementation.

Durbin's brief highlights bad behavior by payment card networks and the negative impact on small-ticket debit transactions. The Fed's rule restricts large banks to a 21-cent per transaction swipe fee, plus a portion of the transaction amount. Although the new cap is less than the 44-cent average fee merchants paid before the law went into effect, it's had a perverse effect on a segment of merchants. For example, many quickservice operators with low average ticket prices have seen rates climb because Visa and MasterCard raised their rates to the new cap.

"It's an "absurd situation," Durbin says in the brief, when card networks can charge a 22-cent interchange fee on the debit-card purchase of 10-cent pencil.

The Fed's initial proposal for a 12-cent debit swipe-fee cap was more consistent with what Congress intended, Durbin says. But the financial services industry influenced the Federal Reserve to issue a final rule that deviated from Congress's intent, he says. Congress never intended to allow bank card companies to include fraud losses, network- processing fees and other costs in their standard, as the rule allows, he says.

Furthermore, the Fed "twists and tortures" the meaning of the Durbin Amendment and tries to "split the baby" between big banks and merchants, Durbin says. He joined the NRA and the other plaintiffs in saying the Fed must go back and adjust its rule. The Federal Reserve has until June 1 to submit its response, then a court date will be scheduled.

 

Conserve RSS Healthcare RSS Conserve RSS

▲ Back to Top

We're glad you're here!®

® 2012-2017 National Restaurant Association. All rights reserved.

2055 L St. NW, Suite 700, Washington, DC 20036
(202) 331-5900 | (800) 424-5156