“The Fed allowed themselves to be influenced by the very banks they are supposed to regulate and raised the originally proposed cap to include expenses the law said were not allowed," he said. "In doing so, they literally gave away half the savings that could have been seen by merchants and their customers. We want them to go back and follow the law this time.”
The new regulations, which took effect Oct. 1, have also led to an increase in swipe fees for some small-ticket purchases, the lawsuit says.
Meanwhile, the electronic payments industry was critical of the legal action.
"Apparently, retailers aren’t happy with their $8 billion windfall — even though they’re pocketing all of it, with no evidence of passing any of it back to their customers," said Trish Wexler, spokeswoman with the Electronic Payments Coaltion in an email to The Hill.
"And now they want even more? We all know the truth — retailers won’t truly be happy until they pay zero to accept cards," she said.
"They don’t want to pay their fair share of this system that brings them more sales and increased security, and want customers to foot the bill instead. That’s simply not fair."
In response to the lowering of swipe fees, several of the nation's largest banks announced last month that they would charge a monthly fee for use of debit cards, but reversed the policy after customers threatened to close their accounts, and in some cases followed through.
Under the Dodd-Frank law, the Federal Reserve set debit card swipe fee levels at an average of 21 cents a transaction, slightly less than half of the previous 44-cent average.
In December, the Fed said that it costs banks an average of 4 cents to process a debit transaction, and proposed that the fees be capped at no more than 12 cents per transaction — triple banks’ actual cost.
On top of the 21 cents, 0.05 percent was added to the transaction and, in most cases, an additional 1 cent was added for fraud prevention — moves that aren't allowed under the law, the NRF said.
“Rather than following the law, it’s almost as if the banks and the Fed were working hand-in-glove to block the genuine competition and common-sense price reductions Congress directed,” Duncan said. “The Fed’s regulations have blunted the competition that would have made greater savings possible.”
The Dodd-Frank law said the Fed could consider the incremental costs of acquiring, clearing and settling each transaction, and specifically prohibited any other expenses from being used to inflate those costs, according to NRF.
“Congress passed this law to cap swipe fees but the banks have turned a ceiling into a floor and raised fees dramatically higher for quick-service restaurants across the nation,” said Rob Green, executive director of the NRF’s National Council of Chain Restaurants. “This clearly was not the intent of Congress.”
The plaintiffs also allege that the Fed’s final rules discourage competition among debit card networks.
To establish a competitive market between networks such as NYCE, Pulse and Plus, as well as Visa and MasterCard, the law required that merchants be given a choice of two networks on every transaction.
Yet, under the Fed’s final regulations, banks can limit their cards so that merchants don't have a choice of networks.
"The lack of competition will allow the dominant networks to continue increasing their fees," the NRF said.