NACS Lays Out Possible Swipe Fee Reform Scenarios

WASHINGTON, D.C. -- Almost one week after a federal judge rejected the hotly contested federal swipe fee rules, many in the retail community are wondering what happens now.

According to NACS, the Association for Convenience & Fuel Retailing, there is no clear answer. If the Federal Reserve appeals the judge's decision to the Circuit Court of Appeals for the District of Columbia, the current rule is likely to remain in place while the appeal is pending, the association noted. 

If the Fed does not appeal, U.S. District Judge Richard Leon has asked for the plaintiffs' and the Fed's views of what should happen next. Open questions include:

• How long it should take the Fed to correct the problems with the current rule;
   
• Whether there should be an interim rule put in place while the Fed does its work; and
   
• Whether the current regulations should remain in effect while the Fed comes up with a new rule.

According to NACS, some of these issues could be sorted out at a status conference on Aug. 14. However, even Leon has indicated any resolution could take several months.

That timetable could stretch to years, though, if the Federal Reserve chooses to appeal Leon's July 31 decision that found that the Fed "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," as CSNews Online reported last week.

If the district court decision -- or part of it -- is upheld on appeal, the same questions about the process and timing for correcting the rule will be before the district court, NACS stated.

A group of retail associations, including NACS, 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. All of the associations are members of the Merchants Payments Coalition, a group of retailers and organizations concerned about the rising costs of swipe fees on both debit and credit cards.

In Leon's 58-page ruling, which rejected regulations imposed by the Durbin Amendment of the Dodd-Frank Wall Street Reform Act, the judge said the Fed did not have the authority to set the 21-cent cap that has been in effect since October 2011. The cap, though, will remain in place until new regulations or interim standards are set.