Durbin Says Fed Set Debit Swipe Cap Too High and 'Consumers Have Suffered'

by Ron Mazursky 0

In a not-too-surprising news flash, the National RetailFederation (NRF) has reported that the author of the Durbin Amendment, SenatorRichard Durbin D-IL, has told the Supreme Court that the Federal Reserve Boarddidn’t follow the “text and the purpose of the law.” In essence, he says that the Federal ReserveBoard misinterpreted the law, and the retailers got it right. They are callingfor a lower debit cap than implemented by the Federal Reserve Board. Thisannouncement came as part of the “friend of the court brief” filed last week followingthe recent NRF appeal to the highest court in the land. This latest appeal cameas a result of the U.S. Circuit Court of Appeals reversing this spring theearlier findings that the Federal Reserve Board needed to reduce its swipe feesand offer 4 (versus 2) competitive EFT routing options to merchants for eachU.S. debit card. The Circuit Courteffectively blamed Senator Durbin for writing an ambiguous law that was open tosome interpretation.

“In last week’s brief, Durbin denied that the lawwas ambiguous, and said the Circuit Court “essentially gave the Board a blankcheck” to include costs that Congress specifically said could not be used toboost debit swipe fees.”

However, the NRF goes on to point out that the 21 cent feecap per debit transaction for regulated banks (over $10 billion in assets),might be significantly higher than the cost per transaction. The Federal Reserve issued a report last weekthat reflects the cost of signature debit transactions for the high volumebanks that is reported in this article to be 4.4 cents per transaction. The Federal Reserve says it has no plans atthis time to revise the fees that have been set.

As mentioned above, it is not surprising at all for the NRFto have Senator Durbin write a brief as a “friend” of the merchantperspective. Durbin has been a strongopponent of the banking industry with regard to these swipe fees. His belief that bringing the rates down tozero or low profit levels doesn’t help anyone – except the merchant community. Unfortunately, continuing to press for anultra-low rate ceiling to “protect” consumers is an empty chant. We do not see any of the reduction in ratesso far coming back to consumers in price discounts. Why would we expect to seefurther reductions as benefitting consumers and generating reductions in consumerprices at retailers? We eagerly awaitthe Supreme Court’s decision as to whether they will hear this case or not.

Overview by Ron Mazursky, Director, Debit Advisory Service

Read full story at NRF.com

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