A federal appeals court panel ruled today that the existing restrictions on debit card swipe fees should largely stand, turning back a challenge by retailers who argued that banks are still earning too much money from the fees.
The ruling by a three-judge panel in the District of Columbia overturned a decision last year by U.S. District Judge Richard Leon. That ruling, which would have forced regulators to tighten restrictions on swipe fees, was put on hold during the appeals process.
The lawsuit was brought by retail trade groups, challenging the Federal Reserve's interpretation of a provision of the Dodd-Frank Act that requires the Fed to limit interchange fees for debit cards. The provision, authored by Illinois Sen. Richard Durbin, is widely known as the Durbin Amendment.
The Durbin Amendment has two main parts. One requires the Fed to cap swipe fees on debit-card purchases, and the other orders the central bank to establish rules on the routing of debit-card transactions. The appeals court upheld the Fed's interpretation of both parts of the law, although it did order the central bank to provide further explanation about what it described as a "minor issue" involving transaction-monitoring costs.
The final Fed rule limited interchange fees on debit cards to roughly 24 cents per transaction. Merchants had argued that was far too high, and said the central bank erred when it raised the cap from an initial proposal of 12 cents. The district court had sided with the merchants on that issue, but the appeals court overturned the ruling.
The appeals court decision was quickly hailed by Richard Hunt, president of the Consumer Bankers Association.
"Reasonable minds have prevailed in vacating the District Court's ruling," Hunt said in a news release.
Other industry representatives were equally ecstatic.
"This is truly a rebuke to the merchants and a victory for credit unions," said Eric Richard, the general counsel for the Credit Union National Association.