21 Cent Swipe Fee Cap Remains after Appeal
Last Friday, a federal appeals court upheld the Federal Reserve’s 21-cent cap on swipe fees that banks are allowed to charge merchants on debit card transactions.
In 2011, Congress asked the central bank to establish a “reasonable” cap for interchange fees. At that time, the average swipe fee was 44 cents. Retailers wanted the limit to be as low as 12 cents, but the Federal Reserve finally settled on 21 cents.
Soon after that ruling, the National Association of Convenience Stores and the National Retail Federation filed a lawsuit against the Fed, saying that the fees should be lowered. In July 2012, a lower court agreed with those organizations. This ruling overturns the lower court and establishes the cap at 21 cents per transaction.
The Electronics Payments Coalition issued a report indicating that 67% of retailers maintained or raised their prices after the ruling in 2011, even though they were saving money. On the other hand, Merchants Payments Coalition reported in 2013 that consumers had saved $5.8 billion in 2012 as a result of lower costs for goods and services.
The recent ruling does not seem to be a win for consumers or retailers, but it does help banks maintain their profit margins.