Supreme Court to Hear Store’s Lawsuit on Debit Card Swipe Fees
The Supreme Court Takes on Debit Card Swipe Fee Case, Ignoring Time Limitation
The Supreme Court has agreed to hear a case that has caught the attention of merchants across the country. In this case, a store is challenging a Federal Reserve policy on debit card swipe fees, arguing that it is illegal. What makes this case even more interesting is that the store is asking the court to ignore a time limitation, allowing them to challenge the policy despite the deadline.
This appeal comes at a time when merchants are growing increasingly concerned about high transaction processing fees. In fact, a new bill called the Credit Card Competition Act has recently been introduced in Congress. This bill, supported by Senators Dick Durbin and Roger Marshall, aims to enhance credit card competition and reduce fees. It would require large banks to allow card payments to be transmitted over alternative networks, breaking the “Visa-Mastercard duopoly” that currently charges a hefty fee for every swipe.
While this legislation aims to benefit merchants, critics argue that it could jeopardize the credit card rewards that Americans enjoy. Nevertheless, the National Retail Federation (NRF) has praised the Supreme Court’s decision to hear the case. According to NRF Chief Administrative Officer and General Counsel Stephanie Martz, the Federal Reserve has failed to update the debit card swipe fee cap as required by Congress, resulting in excessive costs for merchants and consumers.
The case in question, Corner Post Inc. v. Board of Governors of the Federal Reserve System, was granted an order by the Supreme Court on Sept. 29. No justices dissented, although the court did not provide an explanation for its decision. Oral arguments for the case will be scheduled at a later date.
The petitioner, Corner Post Inc., is a convenience store and truck stop in North Dakota that opened in 2018. According to the store’s petition filed with the court on April 13, they claim to have been paying unlawful debit card fees amounting to hundreds of thousands of dollars each year due to the policy they are contesting. They believe their lawsuit deserves consideration by the courts.In 2021, the store sued the Federal Reserve under the Administrative Procedure Act (APA), challenging a 2011 rule that governs certain fees for debit card transactions. The store argued that the interchange and processing fees imposed on merchants were arbitrary, capricious, and violated the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The U.S. Court of Appeals for the 8th Circuit, however, determined in December 2022 that the store’s claims were barred by the six-year statute of limitations. This decision contradicted another federal court of appeals. The store’s petition highlights the fact that it is unclear how they could have been affected by the rule before even processing a single debit card payment.
U.S. Solicitor General Elizabeth Prelogar has urged the Supreme Court to reject the store’s petition, arguing that the 8th Circuit’s decision aligns with other circuits’ rulings on time limits for challenging agency rules.
The Supreme Court’s decision on this case will have significant implications for merchants and the future of debit card swipe fees. As the court resumes oral arguments in October, all eyes will be on the outcome of this pivotal case.
What potential impact could the Supreme Court’s decision on the legality of swipe fee regulations have on the industry and future regulations
Vernors of the Federal Reserve System, revolves around the regulations governing debit card swipe fees. These fees are transaction fees that businesses pay to banks for every debit card sale. In 2011, the Federal Reserve implemented a policy that capped these swipe fees at 21 cents per transaction, plus an additional 0.05% of the transaction value.
However, Corner Post Inc., a grocery store in St. Louis, Missouri, argues that the Federal Reserve should have set a lower cap on swipe fees, as mandated by Congress. The store claims that the policy violates the Durbin Amendment, a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act aimed at reducing swipe fees.
The Durbin Amendment required the Federal Reserve to establish regulations that would result in “reasonable” swipe fees. Critics argue that the current cap does not align with this requirement and that it allows banks to charge excessive fees to merchants.
Furthermore, Corner Post Inc. is also challenging the time limitation on filing such a case. Usually, cases challenging Federal Reserve regulations must be filed within two years after the regulation is implemented. However, the store argues that they discovered the potential violation only recently and should be allowed to challenge the policy despite the deadline.
The Supreme Court’s decision to take on this case has garnered significant attention from merchants across the country. With transaction processing fees becoming a growing concern for businesses, this case has the potential to have a significant impact on the industry.
In addition to this legal battle, there is also a push for legislative action to address swipe fees. The Credit Card Competition Act, introduced in Congress with bipartisan support, seeks to enhance competition in the credit card industry and reduce fees. The proposed legislation would require large banks to allow card payments to be transmitted over alternative networks, thereby breaking the dominance of Visa and Mastercard.
While merchants welcome the prospects of reduced fees, critics argue that such legislation may threaten the credit card rewards that consumers enjoy. These rewards, such as cashback or airline miles, are often funded by swipe fees. In a balance between the interests of merchants and consumers, finding a solution that benefits both parties is crucial.
The NRF’s support for the Supreme Court’s decision to hear the case indicates the widespread concern about excessive swipe fees. The organization believes that the Federal Reserve has not met its obligation to regularly review and adjust swipe fee caps. Consequently, merchants and consumers bear the burden of disproportionately high costs.
As the Supreme Court takes on the Corner Post Inc. v. Board of Governors of the Federal Reserve System case, the outcome will not only affect the involved parties but also set a precedent for future regulations and legal battles regarding debit card swipe fees. It remains to be seen how the Court will decide on the legality of the Federal Reserve’s policy and the time limitation for challenging it.
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