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Fed Formally Files for Swipe-Fee Cap to Remain in Place During Appeal

WASHINGTON, D.C. -- It's official: the Federal Reserve is appealing a recent court decision striking down swipe fee rules governing debit card transactions and has asked the court to keep the existing rules in place during the appeals process.

In a new court filing, the Fed said maintaining the regulations would provide stability in the debit card marketplace while disagreements on rules are settled, according to Bloomberg.

"If the regulations here were vacated by the District Court, there would be no legally binding standards for determining the permissible amount of interchange fees an issuer could receive with respect to a debit card transaction and no limitations on exclusive routing restrictions imposed by issuers and payment networks on debit card transactions," lawyers for the Fed wrote.

The request has the support of at least one retail group, the news outlet noted.

"We'd rather there be no appeal, but if there's going to be an appeal, we'd want the existing rules to stay in place," said Craig Shearman, vice president of the National Retail Federation, one of the plaintiffs in the case. "Otherwise, we'd be back to the Wild, Wild West of no caps on swipe fees."

The Fed will ask the appeals court for an expedited appeal.

The move is not surprising. As CSNews Online reported last week, Scott Alvarez, the Fed's general counsel, told a judge in court on Aug. 21 that the Fed would seek to keep the rules in place while it appeals the case.

The Fed's appeal comes a month after U.S. District Judge Richard Leon ruled that the Federal Reserve disregarded Congress' intent when it decided how much banks can charge retailers to process debit card transactions. As part of the decision, the Fed was instructed to rewrite the rules governing swipe fees. The current 21-cent cap went into effect in October 2011.

A group of retail associations, including NACS, the Association for Convenience & Fuel Retailing; the Food Marketing Institute; the National Restaurant Association; and the National Retail Federation, filed suit in November 2011, claiming they would be "substantially harmed" by the fees set by the Fed.

In his July 31 ruling, Leon wrote: "Upon consideration of the pleadings, oral argument and the entire record therein, the court concludes that the board has clearly disregarded Congress' statutory intent by inappropriately inflating all debit card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit card transaction. Accordingly, the plaintiffs' motion is granted and defendant's motion is denied."

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