US: Fed files anticipated appeal of ruling against swipe-fee caps

The US Federal Reserve Board has officially replied to a judge’s recent decision condemning the Fed’s approach to swipe-fee caps as too favorable to the banks.

The Federal Reserve Board filed an appeal to US District Judge Richard Leon’s July ruling, which found that the caps placed on swipe fees, or interchange fees, were higher than Congress intended, and that the Fed didn’t give retailers enough alternatives for routing transactions. But the Fed argued in its appeal that it followed the law, and accused retailers of a misguided interpretation of the legislation regarding, for example, routing options for card authentication.

”The merchants’ insistence that the board should have required multiple routing options for each method of authentication enabled on a card, without regard to limitations imposed by consumers or merchants themselves, is based on a stilted reading of the statutory text,” the regulator said in its appeal.

The Fed’s regulation required debit card issuers to offer two payment networks on a card. The retailers insist on two PIN and two signature debit alternatives.

Further, the Fed said that while the merchants have provided one interpretation of the reading, “it is not the best – and is certainly not the only – reading of the statute.”

The Fed said it prefers a broader definition of costs sought by retailers, claiming such a view is aligned with the way Congress has previously interpreted similar terms.

Several bank trade groups and credit union associations offered their support of the appeal, filing a brief to back the Fed. Those supporters include CUNA and NAFCU.

The retailers have until November 20 to file their arguments in the case, say reports.

The Fed’s full appeal can be read here.

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Full content: Credit Union Times

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