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National Restaurant Association - NRA challenges Fed with debit-swipe suit

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NRA challenges Fed with debit-swipe suit

When the Federal Reserve last year capped debit swipe fees for merchants at 21 cents per transaction plus 0.05 percent of sales for large financial institutions beginning Oct. 1, the amount was less than the 44 cents per transaction that merchants had averaged to that point, but more than the 12-cent cap that the Fed first proposed in December 2010.

The result: While the Federal Reserve's rule significantly brought down debit swipe fees for many restaurants and other businesses, some merchants -- especially those with smaller-ticket transactions -- have seen rates rise since Oct. 1.

"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," said Scott DeFife, executive vice president of policy and government affairs for the National Restaurant Association. The Federal Reserve gave card networks too much latitude to raise swipe fees beyond what's reasonable and proportional, the plaintiffs argue.

As a result, the National Restaurant Association last week joined other merchant groups in a lawsuit that charges the Federal Reserve with failing to follow the intent of Congress when the Fed issued regulations to curb debit-card swipe fees.

The Fed's rules implement the NRA-supported Durbin Amendment, which Congress passed in 2010 as part of the Dodd-Frank financial services reform bill. Sen. Dick Durbin (D-Ill.) championed the measure, which was aimed at containing rapidly escalating debit-fee costs for merchants by promoting more competition among the major debit card networks -- Visa and MasterCard -- and the banks that issue those cards. The Durbin Amendment required the Fed to issue regulations to ensure that debit-card swipe fees are "reasonable and proportional" to the cost of processing debit transactions.

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

The NRA joined the Food Marketing Institute, the National Association of Convenience Stores, the National Retail Federation and two companies (Boscov's Department Store and Miller Oil Company) in the lawsuit. Read more.



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