This story appeared in Bank Digest.
Financial services groups have told a federal court that a lawsuit brought by merchant associations opposed to the Federal Reserve Board’s final rule on debit card interchange or swipe fees would only “exacerbate the Board’s error” by depriving card issuers of the right to make a reasonable return on their product. In November 2011, the National Retail Federation and other merchant groups filed a lawsuit (see 2011 No. 4719) stating that the Fed failed to follow key requirements of the Dodd-Frank Act when it adopted a “flawed” cap on debit card swipe fees. The groups claim that this has allowed big banks to continue charging high swipe fees, while discouraging price competition among card networks. In a friend-of-court brief filed March 15, 2012, with the U.S. District Court for the District of Columbia, the groups, which include the American Bankers Association, The Financial Services Roundtable, and the Consumer Bankers Association, state that the Fed’s imposition of “unreasonable” price controls on interchange fees grants merchants a “multibillion-dollar windfall” by capping fees well below market-based rates.