A U.S. appeals court on March 21 upheld the Federal Reserve’s 21-cent cap on debit card point-of-sale interchange, striking a blow to merchants who thought it excessive and wanted it lower, Bloomberg reported. The cap represents about half of what the average interchange rate was before it was introduced in October 2011.
A U.S. appeals court on March 21 upheld the Federal Reserve’s 21-cent cap on debit card point-of-sale interchange, striking a blow to merchants who thought it excessive and wanted it lower, Bloomberg reported. The cap represents about half of what the average interchange rate was before it was introduced in October 2011.
In July, the Fed appealed a federal judge’s ruling that threw out its fee cap. The judge ruled that the Fed included costs that were not allowable under the Dodd-Frank Act, in which the so-called Durbin amendment setting the cap rests.
“Were we to agree with the merchants that the statute allows recovery only of ‘incremental’ ACS costs, we would have to invalidate the rule without considering the particular categories of costs the merchants challenge given that the Board expressly declined to define the ambiguous statutory term “incremental,” let alone determine whether those particular types of costs qualify as “incremental” ACS costs,” the appeals court noted in its ruling.
The appeals court also upheld the Fed’s decision to require two competing PIN-debit network brands on debit cards. The judge’s decision last summer also had thrown out that policy, forcing the industry to also consider the possibility of having more than one signature-debit brand on debit cards as well.
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