The Federal Reserve is reportedly ready to propose reducing debit card fees for merchants.
The U.S. central bank on Tuesday (Oct. 17) announced a meeting scheduled for Oct. 25 with one topic on the agenda: “Proposed revisions to the Board’s debit interchange fee cap.”
Hours later, the Wall Street Journal (WSJ) — citing sources familiar with the matter — reported that this proposal would lower the cap.
Merchants pay banks 21 cents plus 0.05% of the transaction cost for each customer transaction, a level fixed by the Federal Reserve 13 years ago. As the WSJ notes, the Fed can reduce the cap if it sees the processing cost for debit-card payments begin to wane but has so far not taken this path.
A spokesperson for the Federal Reserve told PYMNTS the board would not comment on the matter before its meeting.
Following the meeting next week, the WSJ report says, the Fed would launch a public comment period that would likely involve intense lobbying efforts by card issuers and merchants. The proposal would need a final vote by the Fed’s Board of Governors before going into effect.
For years, merchants have pleaded with the Fed to reduce debit interchange fees. Last month, the Supreme Court said it would hear a case that could force the central bank to lower fees.
The lawsuit, filed by a North Dakota convenience store called Corner Post, challenges the 2011 cap set by the Fed. The store and its co-plaintiffs argue that the regulation that set the fee violates the Dodd-Frank Act’s Durbin Amendment, which was designed to regulate debit card swipe fees.
As noted here last month, the case before the Supreme Court centers around whether the lawsuit was filed in a timely manner under the Administrative Procedure Act (APA), the report said. The APA has a six-year statute of limitations for rules challenges. Corner Post argues that it met the deadline because it sued within three years of opening and first being injured by Regulation II.
However, a lower court ruled that the clock for APA claims began running when the rule went into effect, not when the store was — allegedly — affected by it.
Meanwhile, D.C. lawmakers are once again trying to pass the Credit Card Competition Act, which proponents say would give merchants more choice by letting them use networks with lower swipe fees than those offered by Visa and Mastercard.
In theory, stores could pass those savings onto consumers, though — as PYMNTS wrote in June — there’s no evidence they’ve done so in the past.