The Supreme Court has agreed to hear a case requesting the Federal Reserve to lower the cap on debit card “swipe fees.” This case stems from an amendment by Sen. Dick Durbin to the Dodd-Frank Act, which directed the Fed to set a “reasonable” cap on fees charged by banks to merchants for each debit card transaction. The Corner Post, a truck stop and convenience store in North Dakota, is leading the appeal against the Fed’s cap, arguing that it is higher than what Congress intended. The National Retail Federation (NRF) supports the appeal and has stated that banks’ transaction processing costs have significantly decreased, making the current fees excessive for merchants and consumers.
The NRF is also championing Durbin’s Credit Card Competition Act, which aims to reduce credit card swipe fees by requiring financial institutions with over $100 billion in assets to offer at least two network options for credit card transactions. Visa and Mastercard, which dominate the credit card network market, are among the institutions opposing the bill through the Electronic Payment Coalition. The coalition has cited the failure of the Durbin debit card cap and a 2015 study from the Richmond Fed, which found that most merchants did not pass on any savings from the cap to customers. The Supreme Court’s decision to hear this case has significant implications for the future regulation of swipe fees and the competitive landscape of the credit card market.
Overall, the Supreme Court’s agreement to take up the case challenging the Federal Reserve’s cap on debit card swipe fees has sparked an important debate over the fairness of these fees and their impact on merchants and consumers. The Corner Post, along with the North Dakota Retail Association and the North Dakota Petroleum Marketers Association, argue that the cap set by the Fed is higher than what was originally intended by Congress. On the other hand, the NRF supports the appeal and claims that transaction processing costs for banks have significantly dropped, making the current fees excessive. The outcome of this case could potentially influence the regulation of swipe fees and lead to changes in the credit card market, as it coincides with Durbin’s Credit Card Competition Act aimed at reducing credit card swipe fees.