Supreme Court to Rule on Debit Card Swipe Fees: What it Means for Consumers

The Supreme Court has agreed to hear a case that calls for the Federal Reserve to reduce debit card “swipe fees.” This move follows an amendment by Senator Dick Durbin (D-Ill.) to the 2010 Dodd-Frank Act, which instructed the Fed to establish a “reasonable” cap on fees charged by banks to merchants for each debit card swipe. The fees must also be proportional to the banks’ costs.

In 2011, the Fed implemented a cap of 21 cents on fees for financial institutions with assets of $10 billion or more, with an additional 1 cent allocated for fraud prevention and 0.05 percent for fraud recovery.

The Supreme Court has accepted an appeal brought by Corner Post, a North Dakota-based truck stop and convenience store, challenging the Fed’s cap on debit card swipe fees.

Corner Post joined forces with the North Dakota Retail Association and the North Dakota Petroleum Marketers Association in the original 2021 case filed in the U.S. District Court in Bismarck.

The plaintiffs argued that the cap set by the Fed was higher than what Congress intended. Initially, the Fed had proposed a 12 cent cap but raised it after considering the impact on all industries.

“Banks’ transaction processing costs have significantly decreased, yet these fees continue to burden merchants and raise prices for consumers,” said Stephanie Martz, National Retail Federation (NRF) Chief Administrative Officer and General Counsel, in a statement. Martz was previously co-counsel on the case.

“Retailers are now paying twice as much as they should if the Fed had followed the law. If the Fed won’t take action, the courts should uphold the law.”

The NRF, although not a party in the case, has welcomed the Supreme Court’s decision. Additionally, they are advocating for Durbin’s new bill, which aims to reduce credit card swipe fees.

The Credit Card Competition Act would require financial institutions with assets exceeding $100 billion to offer merchants at least two network options for processing credit card transactions. One of these options must be an alternative to Visa and Mastercard, which dominate the U.S. credit card network market.

Visa and Mastercard, along with other financial institutions and credit unions, are represented by the Electronic Payment Coalition (EPC), which is vigorously opposing Durbin’s bill.

The EPC has pointed to the decision to cap debit card fees as evidence of why Congress should not impose similar restrictions on credit cards.

“We believe that Durbin’s debit approach was a complete failure,” stated EPC Executive Director Aaron Stetter in a previous interview with The Hill, referring to a 2015 study conducted by the Richmond Fed that found most merchants did not pass on the savings to customers in the form of lower prices.

The Hill’s request for comment from the EPC has not yet been answered.