U.S. Supreme Court passes on swipe fees case brought by retailers

The battle over interchange fees between the nation’s retailers and banks hit a road block as the U.S. Supreme Court decided to not hear the case filed by the National Retail Federation in August.

The cap on swipe fees will stand at 21 to 24 cents following the high court decision. The NRF notes that intense lobbying from the financial services industry prompted the Fed to move off its original recommendation for a 12-cent cap. The NRF and other consumer groups have vowed to keep the fight going.

The retail sector expressed disappointed by the court’s decision not to review an appellate court ruling about the 2011 cap set by the Federal Reserve, which exceeded limits imposed by congressional legislation in 2010. Wal-Mart Stores Inc., the nation’s largest retailer, told The City Wire it was not a plaintiff in the National Retail Federation case passed on by the Supreme Court. However, the Bentonville-based retailer did file an amicus brief supporting the NRF challenge before the Court.

“The court’s decision is disappointing because it leaves merchants and their customers paying far more than intended by Congress,” noted NRF General Counsel Mallory Duncan. 

“Federal agencies have flexibility in implementing our nation’s laws, but do not have the discretion to blatantly ignore the wishes of elected officials and the clear language of the statute. The court’s ruling means retailers will keep paying billions of dollars more than they should, and that fee-hungry banks will continue to rake in unearned profits that ultimately come out of consumers’ pockets. We will continue to press the issue.”

The retail sector claims that banks will benefit from the ruling, but Duncan said the battle is not over.

“There is still litigation pending on credit card swipe fees, and policymakers continue to be concerned by the anti-consumer and anti-competitive practices of the card industry,” Duncan notes.

Richard Hunt, president and CEO of the Consumer Bankers Association, praised the Court decision to not hear the case.

“Reasonable minds have prevailed in denying a writ of certiorari. Government mandated price controls, known as the Durbin Amendment, have yet to work as advertised and retailers still have not proved savings have been passed on to consumers,” Hunt noted in a statement. “Make no mistake about it – consumers must come first in this process, not the bottom-line of retailers. This drawn-out fight should put on notice those Members of Congress who insist upon interfering with the free market.”

Swipe fees are a percentage of the transaction that banks take from retailers each time a credit card is swiped to pay for a purchase, averaging about 2%. Banks also took a percentage of the transaction for debit cards until October 2011, when they were capped at a flat fee of about 21 cents per transaction (down from an average of about 45 cents) under the Dodd-Frank Consumer Protection and Wall Street Reform Act.

Many retailers have cited swipe fees as their second or third highest cost behind salaries and employee health benefits. With retail industry profits averaging only about 2 %, there is no room for retailers to absorb the expense, so swipe fees are passed on to customers in the form of higher prices. 

By NRF estimates, swipe fees cost the average U.S. household about $400 a year and hurt retail sales because consumers buy less when prices go up.