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Court Asked to Uphold Swipe Fee Cap Order

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Retailers are waiting to hear whether an appeals court will uphold a ruling that the Federal Reserve set its cap on debit card swipe fees significantly higher than intended by Congress.

“Four years after the law was passed, debit swipe fees are still far higher than they should be, and banks are raking in billions of dollars in unearned profits,” NRF senior vice president and general counsel Mallory Duncan said. “Instead of doing what Congress ordered, the Fed gave in to pressure from big banks.”

NRF’s attorneys appeared before the U.S. Circuit Court of Appeals in Washington during a January hearing on the Fed’s challenge of U.S. District Court Judge Richard Leon’s July ruling that the 21-cent cap is too high and should be set lower. The ruling came in a lawsuit brought by NRF and other groups.

Under a 2010 law, the Fed was required to adopt regulations that would reduce debit card swipe fees from an average of 45 cents per transaction to a “reasonable” level “proportional” to banks’ cost for processing the transactions. The Fed estimated the cost at an average of 4 cents and initially proposed a 12-cent cap, but eventually set the figure at 21 cents after heavy lobbying by banks.

A 2013 study found the current cap is saving merchants $8.5 billion a year, with more than two-thirds passed along to consumers, but that a total of $12.5 billion could have been saved under a 12-cent cap.

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