Supreme Court passes on debit card fees

Banks struck a big victory over retailers Tuesday, as the Supreme Court declined to revisit a lower court ruling that allowed higher limits on debit card fees.

The high court’s decision puts to rest, at least for now, a highly contentious battle that pitted retailers against banks, with billions of dollars at stake.

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At issue is so-called “swipe fees,” which is the amount that banks can charge retailers for accepting debit cards. Congress ordered the Federal Reserve to set limits on those fees as part of the Dodd-Frank financial reform law in 2011, setting off a fierce lobbying and legal fight between the two industries.

By declining to hear the case, the Supreme Court leaves in place a March ruling that established a much higher cap for those fees than retailers wanted. While harshly critical of any cap at all, banks hailed the court’s move.

“Reasonable minds have prevailed,” said Richard Hunt, president and CEO of the Consumer Bankers Association. “This drawn-out fight should put on notice those members of Congress who insist upon interfering with the free market.”

Retailers said they were disappointed by the decision but vowed to keep fighting on other fronts, even suggesting more battles to come in the halls of Congress.

“Banks will benefit from this ruling but the battle over swipe fees isn’t over,” said Mallory Duncan, vice president and general counsel for the National Retail Federation. “There is still litigation pending on credit card swipe fees, and policymakers continue to be concerned by the anti-consumer and anti-competitive practices of the card industry.”

The NRF joined other merchant groups in bringing the lawsuit challenging the higher limits.

The swipe fee saga began after lawmakers included a provision setting a limit on those fees in Dodd-Frank. The so-called “Durbin Amendment,” named after its primary backer, Sen. Dick DurbinRichard (Dick) Joseph DurbinSenate left in limbo by Trump tweets, House delays The Hill's Morning Report — Sponsored by PhRMA — Immigration drama grips Washington Senate Gang of Four to meet next week on immigration MORE (D-Ill.), was fiercely resisted by banks, which argued the government had no role in a private industry matter. But retailers have long argued banks were charging fees that went well beyond the cost of processing a transaction and reaping huge profits in the process.

The provision ordered the Federal Reserve to set “reasonable and proportional” limits on how much banks could charge for a debit card transaction.  The central bank originally proposed a limit of just 7-12 cents per transaction. But fierce bank pushback raised that cap when it was finalized, climbing all the way to 21 cents per swipe.

Before the Fed set a cap, the average cost of a transaction was 45 cents.

Retailers cried foul at the higher cap, and took their fight to the courts. A lower court agreed the higher cap was invalid, saying it flouted Congress’s intent to curb the fees, but that decision was later reversed by a U.S. Appeals Court, which the Supreme Court decided not to reconsider.