Durbin: Swipe Fee Ruling a Victory for Consumers, Small Businesses

Ruling Sets Stage For Review of Fed Rules, Lower Swipe Fees

Washington, D.C. – Assistant Majority Leader Dick Durbin (D-IL) released the following statement today after the Federal District Court in Washington, D.C. threw out the Federal Reserve’s regulations governing swipe fees, saying the Fed disregarded congressional intent and “inappropriately” inflated debit card transaction fees by billions of dollars.


“Today’s decision by the Federal District Court is a victory for consumers and small business around the country and will lead to lower interchange rates for billions of debit card transactions each year,” Durbin said. “The Fed’s 2011 decision to bend to the lobbying by the big banks and card giants cost small business and consumers tens of billions of dollars and did not do enough to rein in the anti-competitive, anti-consumer practices of Visa and MasterCard.”


“By requiring debit card fees to be reasonable, and by cleaning up Visa’s and MasterCard’s worst abuses, small businesses and their customers will be able to keep more of their own money and common sense and fairness – not big bank profits – will be the guiding force of the swipe fee system.”


In its 2011 final rulemaking, the Fed deviated from Congressional intent and allowed for the inclusion of additional costs, outside the scope of the permissible costs incurred by a card issuer in a debit transaction. This inclusion raised the overall debit interchange cap, costing consumers and small business billions of dollars. Durbin, the author of the swipe fee legislation, wrote an amicus brief challenging the Fed’s interpretation of the law in Federal District Court. Durbin’s brief and the Courts decision are attached.


Last week, Durbin sent a letter to Federal Reserve Board Chairman Ben Bernanke urging the Fed to review the new interchange fee regulations the European Commission announced last week and to include the Commission’s analysis and recommendations into the Board’s standards for debit interchange fees charged in the United States. A copy of that letter is attached.


U.S. interchange rates are among the highest in the world.  In the Fed’s initial rulemaking in December 2010, the Fed proposed a debit interchange fee cap of 7-12 cents per transaction. However, in its July 2011 final rulemaking, the Fed set a debit interchange cap of about 24 cents, effectively doubling the initially proposed rate. Last week, the European Commission proposed a debit interchange cap of 0.2% which closely aligns with the 7 cent cap proposed in the Fed’s initial rule.