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Retailers want Durbin do-over

By Marcie Geffner ·
Thursday, December 1, 2011
Posted: 9 am ET

Consumers who thought the battle over so-called swipe fees on debit card transactions was over might be surprised at the latest development: The retailers are suing the federal government, claiming the Federal Reserve didn't properly apply the law when it adopted a cap on these fees.

According to a recent press statement, the National Retail Federation, or NRF, Food Marketing Institute, National Association of Convenience Stores and two retailers have filed a lawsuit in federal court, saying the Fed's "failure" to follow key requirements has "allowed big banks to continue charging unjustifiably high swipe fees and discouraged price competition among credit card networks."

Mallory Duncan, a senior vice president at the NRF, said in the statement that the Fed's swipe fee caps weren't "reasonable" or "proportional," as required by the so-called Durbin Amendment, which was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

"Instead," Duncan said, "the Fed allowed themselves to be influenced by the very banks they are supposed to regulate and raised the originally proposed cap to include expenses the law said were not allowed. In doing so, they literally gave away half the savings that could have been seen by merchants and their customers. We want them to go back and follow the law."

The two retailers involved in the lawsuit are Boscov's Department Store in Reading, Pa., and Miller Oil Co., a convenience store and gas station chain in Norfolk, Va., according to the NRF statement.

The Fed determined that banks spend an average of 4 cents to process a debit transaction. The cap sets the maximum fee, paid by the retailer, at 21 cents, plus 0.05 percent of the transaction and, in most cases, an additional 1 cent for fraud prevention.

The cap took effect Oct. 1. Financial institutions with less than $10 billion in assets are exempt.

The American Bankers Association issued its own statement, calling the retailers' lawsuit "disgraceful."

Frank Keating, the group's CEO, compared the retailers to hogs, saying they were "back at the trough, seeking more profits from government price controls."

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