What Does the Swipe-Fee Rule Rejection Really Mean?

WASHINGTON, D.C. – Judge Richard Leon's July 31 ruling that the Federal Reserve ran "completely afoul of the text, design and purpose" of Congress' intent when it crafted debit card interchange fee regulations sent a strong message to the banks and the retail industry. But the question on everyone's mind is: What’s next?

Not much, at least not just yet, according to some industry insiders. In the short term, the 21-cent cap on debit swipe fees imposed by the Durbin Amendment will remain in place pending new regulations or interim standards. The Fed also has the option of appealing Leon's ruling to a higher court before redrafting regulations.

In other words, convenience stores and other retailers won't see a lower cap on debit swipe fees in the immediate future, but if there is no appeal or if an appeal is unsuccessful, that day should come.

Once it goes back to the drawing board, the Fed could come up with a "thoroughly new set of rules," Jeff Shinder of Constantine Cannon LLP told CSNews Online. His law firm served as counsel to the Merchants Payments Coalition during the original swipe fee rulemaking proceedings and was hired by a group of quick-service restaurants and other small-ticket merchants to write an amicus brief regarding certain points of law and the Fed's regulations, which Judge Leon took into account when making his decision.

"The judge gave a very explicit roadmap," Shinder said. Any new regulations must follow the clear dictates of the statute and Congress' intent in creating it. "If they do that, ensuing regulations should result in debit card interchange [fees] that are substantially lower than what the previous now-vacated regulation provided for."

Along with ushering in savings, Shinder believes new regulations are likely to spur innovation in the payments industry, calling the current system "anti-competitive and not particularly innovative."

Regardless of the eventual regulatory details, if the decision stands, retailers and customers alike should consider it a "big, big win," he added.