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National Restaurant Association - Court dispute over swipe fees continues

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Court dispute over swipe fees continues

The National Restaurant Association and industry partners are continuing their legal battle to ensure fair credit- and debit-swipe fees for restaurants and other businesses.

In the latest chapter, the NRA last week joined NACS, National Retail Federation, Food Marketing Institute and others in filing a brief in support of a court decision that the Federal Reserve’s final rule on swipe fees violated what Congress intended to accomplish when it passed a law to ensure merchant swipe fees were “reasonable and proportional” to the transaction cost.

The brief was filed in response to the Fed’s appeal of a July ruling by U.S. District Court, District of Columbia Judge Richard Leon that the Fed had exceeded its legal authority by including a 21-cent-per-transaction limit in its final rule on swipe fees, far higher than the 7-cent safe harbor and 12-cent cap that had been included in the Fed’s proposed rule. Leon’s ruling was a win for the NRA, which was a lead plaintiff in the case along with the Food Marketing Institute, NACS, Boscov’s Department Store and Miller Oil Company.

In their lawsuit, the NRA and co-plaintiffs alleged that the 21-cent limit violated the “Durbin Amendment”— named for its lead advocate, Sen. Dick Durbin (D-Ill.) — of the 2010 Dodd-Frank financial services reform bill. The NRA and co-plaintiffs also argued that the Fed’s final rule did not promote the price competition among card networks that would help reduce network fees.

After the Fed’s final rule was issued, Visa and MasterCard announced they were increasing their swipe fees on small-ticket transactions — roughly $15 or less — to the Fed’s 21-cent cap.

“We have always felt that the Fed carried out the rulemaking in an inappropriate way based on the law Congress passed,” said Liz Garner, NRA director, commerce and entrepreneurship. “As a result, the major card brands, which still operate in a marketplace that lacks competition, decided to raise rates on small-ticket transactions. Not because they had to, but because they chose to.”

Federal Reserve data shows that an overwhelming majority—94 percent—of debit card transactions at covered issuers cost those banks less than two cents a transaction.

Oral arguments in the Fed’s appeal are scheduled for January 17 in the U.S. Court of Appeals, District of Columbia Circuit.

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