Reversal of Fortune: Judge Strikes Durbin Debit-Card Fee Limit
In a stunning turn in the fight between retailers and financial institutions, U.S. District Judge Richard Leon has struck down the Durbin Amendment of the Dodd-Frank Act.
The Durbin Amendment, which was proposed by Senator Richard Durbin (D., Ill.), went into effect October 1st in 2011. It created limits on transaction fees for debit cards. The spirit of the amendment was to lower these fees to more accurately reflect the costs of payment processing. Instead, retailers claim that the act led to the unfair increase of fees and stifled competition.
According to Bloomberg, the cap, which was set at 21 cents per transaction by the Federal Reserve, “disregarded Congress’s statutory intent by inappropriately inflating all debit card transaction fees by billions of dollars,” wrote Judge Leon in his ruling.
The lawsuit was filed in November of 2011 by the National Retail Federation, the Food Marketing Institute, NACS (National Association of Convenience Stores), Oil Miller Co., and Boscov’s Department Store LLC.
There will be no change in fees until August 14, which is the date that Judge Leon has set for a court hearing to discuss future actions.
This development is a major victory for retailers and a blow to the Fed, which has seen its attempts at providing more oversight under the provisions of Dodd-Frank, fail, or in this case, backfire completely.