The U.S. Supreme Court on Tuesday denied a petition by the Food Marketing Institute (FMI), National Association of Convenience Stores, National Retail Federation, Boscov’s Department Store, National Restaurant Association and Miller Oil Co. that challenged the Federal Reserve’s rule on debit card swipe fees. The court’s rejection of this case ignores its impact on U.S. businesses, schools, charities, government and customers every time they use a debit card, according to the groups.
The most recent FMI Food Retailing Industry Speaks “Worry Index” ranked credit/debit card interchange fees among the most critical issues facing the industry. Card companies and banks collect “swipe” fees on each transaction for which a customer uses a credit or debit card to make a purchase, but these fees are set exclusively by Visa and MasterCard in conjunction with the banks that service the cards. Food retailers and other business entities have no opportunity to negotiate the fees to the benefit of their customers.
“We are disheartened that the court rejected our case, reflecting utter failure to recognize the significance the ‘swipe fee’ issue holds for consumers and American businesses,” said FMI President and CEO Leslie G. Sarasin. “The food retail industry, on average, operates at a 1-to-2 percent profit margin, so every penny matters. When transaction fees are arbitrarily set by the big banks and the card companies they service, this becomes a matter of justice that threatens the economic survival of community grocery stores, businesses, charities, schools and every institution utilizing a debit and credit cards payment system. We now look to the Fed to improve this rule and carry out both the clear language of the statute and the intent of Congress.”
In 2013, nearly 70 percent of all transactions were made with credit/debit cards, and these interchange fees often exceeded a retailer’s narrow profit margin on the items purchased. FMI and the retail community achieved a legislative victory upon passage of the Durbin amendment as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, but the Federal Reserve’s final ruling in 2011 to implement the law failed to reflect the intent of Congress, thus sparking a lengthy legal battle. The Federal Reserve’s final rule allows banks to collect 21 cents, plus a fraud adjustment, for each transaction as opposed to the original Federal Reserve proposal of 7-12 cents. The rule went far beyond that which was contained in the statute or that which Congress intended, the groups say.
