Bankers File Amicus Brief Opposing Merchants in Interchange Lawsuit 

March 19, 2012

A coalition of trade groups representing U.S. financial institutions has filed an amicus brief in a lawsuit brought by merchants against the Federal Reserve charging the Fed did not follow a congressional mandate properly when it issued its final rule implementing the Durbin Amendment last year. The merchants, who recently sought summary judgment in the suit, argue that the Fed’s final rule allows issuers to take into consideration costs the original Durbin Amendment proscribed, resulting in the 21 cent cap on debit card transactions—a cap merchants feel is too high. The suit also says the final rule mishandled the network non-exclusivity portion of the Durbin Amendment, resulting in “entire categories of debit card transactions—such as Internet and telephone transactions, hotel stays and car rentals—not being afforded the competitive network choice required by statute.”

The amicus brief filed by the banking groups, not surprisingly, argues the Fed caps are too low, charging the 21-cent cap does not cover all issuers’ costs and allow “a reasonable rate of return” on their investments. The bankers charge merchants have saved $825 million since the Durbin Amendment was implemented by the Fed and that the rule will result in $6-8 billion in additional revenue for merchants annually.

“Not content with the annual $6-$8 billion in extra profits they have secured, giant retailers are now suing to increase their windfall,” the brief charges.

While many merchants, have, indeed seen additional income from lower interchange rates, some, especially those that perform mostly small-ticket transactions, actually saw the amount they pay in debit swipe fees rise when the major card networks eliminated a lower rate for small-ticket purchases.

The coalition filing the amicus brief includes the American Bankers Association, Clearing House Association, Clearing House Payments Company, Consumer Bankers Association, the Credit Union National Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, National Bankers Association and National Association of Federal Credit Unions.