TREE NEWS update: A federal appeals court ruled that the Federal Reserve must rewrite its rule capping debit card transaction processing fees, finding the current rule violates congressional intent. The rule allows banks to include certain costs, such as fraud prevention, when calculating swipe fees, which the court said does not meet the requirements of the 2010 Dodd-Frank Act. The decision upholds a lower court’s ruling that vacated the Fed’s debit card interchange fee cap.
US Appeals Court Overturns Fed’s 2011 Debit Card Swipe Fee Rule
The ruling reopens a long-settled cost-allocation question for debit interchange, with the practical effect landing on the banks that rely on swipe-fee revenue and the merchants who absorb it. Because the court anchored its reasoning in Dodd-Frank's statutory intent rather than the specific cost figures, the Fed's rewrite will be judged on how narrowly it defines allowable costs. Whether the Fed narrows the fraud-prevention component, and how quickly a replacement rule is proposed, is the open question.
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