Merchants Push for Summary Judgment in Interchange Suit

March 12, 2012

Several merchant groups and two retailers, which filed a lawsuit against the Federal Reserve Board in November claiming the agency didn’t follow the intent of the Dodd-Frank Act when it finalized rules implementing the Durbin Amendment to regulate debit interchange and network routing and exclusivity, now are seeking summary judgment to end the case before it reaches a courtroom. The motion for summary judgment claims the rules exceed the authority granted to the Fed by Congress, and that the final rule is “arbitrary, capricious, an abuse of process and otherwise not in accordance with the law in violation of the Administrative Procedure Act.”

While the Durbin Amendment was seen as a win for merchants when it was passed, some—notably those that process a high volume of low-value transactions—actually saw the amount they pay in interchange rise when the card networks eliminated lower rates for small-ticket purchases.

The motion argues that the Fed’s final rule “greatly expanded the costs allowed in the interchange fee standard,” which resulted in “shifting billions of dollars in additional costs from the issuing banks to merchants that accept debit cards.” 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.”

On Thursday, the National Restaurant Association joined the Food Marketing Institute, the National Association of Convenience Stores, the National Retail Federation, Boscov’s Department Store and Miller Oil Co. in the suit.