WASHINGTON (Aug. 12, 2013) — A federal judge has ruled that the Federal Reserve improperly inflated the fees banks and card companies are allowed to charge retailers when their customers swipe debit cards.
The fees, according to the Washington staff of the Specialty Equipment Market Association (SEMA), are currently set at $.21 per transaction plus $.01–$.03 more to cover fraud prevention and other adjustments. Retailers argued that the fees are too high to compensate the financial institution's "authorization, clearance or settlement" costs, SEMA said.
The Dodd-Frank financial reform law provides the Federal Reserve with oversight of fees for processing debit card transactions—called "interchange" fees. When the legislation was being debated in 2010, SEMA said it and 54 other trade associations asked Congress to limit the amount card companies could charge merchants when processing payments. Congress addressed swipe fees but not credit card fees.
The Federal Reserve had initially recommended a $.12 transaction cap but then raised the fee to $.21.
SEMA said the judge's ruling does not take immediate effect, giving the Federal Reserve time to reconsider its fee structure.