The National Restaurant Association said a U.S. District Court’s ruling in favor of the Association and co-plaintiffs in its challenge against the Federal Reserve’s debit fee rulemaking is a “tremendous victory” for merchants and their customers.
The U.S. D.C. District Court issued the following opinion: “Upon consideration of the pleadings, oral argument, and the entire record therein, the Court concludes that the Board has clearly disregarded Congress's statutory intent by inappropriately inflating all debit card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit card transaction. Accordingly, the plaintiffs' motion is granted and defendant's motion is denied.”
“The District Court’s decision a tremendous victory for the restaurant and foodservice community and the over 130 million customers we serve every day,” says Scott DeFife, executive vice president, policy and government affairs, NRA. “In particular, this ruling should provide relief for merchants with small-dollar tickets on whom Visa and MasterCard used the Federal Reserve’s original final rule as an excuse to more than triple rates on those transactions.
“In accordance with the Court’s ruling, the law can now be carried out as intended by Congress, creating real relief for merchants, and ultimately consumers from excessive, hidden debit card swipe fees. It also requires the Federal Reserve to revisit rules pertaining to network competition, which should result in more competition between networks on all types of debit transactions going forward.”
The National Restaurant Association was a lead supporter of debit card fee reforms contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which charged the Federal Reserve with ensuring that debit-card fees are “reasonable and proportional” to the cost of processing transactions.
In June 2011, the Federal Reserve announced its final rule to limit swipe fees that merchants pay for debit-card transactions at 21 cents per transaction – a significant increase over the 7-cent safe harbor/12-cent swipe-fee cap that the Federal Reserve first proposed in December 2010.
As a result, Visa and MasterCard announced they would raise swipe fees to the Fed’s cap on small-ticket transactions ($15 or less), a move that hurt small businesses with heavy small-ticket volume, such as the nation’s quick service restaurants.
Also in their challenge, the Association and co-plaintiffs argued that the final rule failed to promote the price competition among card networks that would help reduce network fees. The law intended to establish a competitive market dynamic between networks, such as Visa and MasterCard, to keep costs down. However, under the Fed’s final rule, there would be no competition on signature debit routing and very limited, if any, competition on PIN transactions.
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 Company as plaintiffs in the suit.