Appeals court upholds Fed’s debit card fee limits

Reuters | March 21, 2014

A U.S. appeals court upheld the Federal Reserve’s controversial rules for debit card “swipe fees” on Friday, disappointing merchants who had argued the charges were too high.

Businesses pay the fees to banks when customers use debit cards to purchase goods or services. The fees reimburse banks for costs involved in offering debit cards.

At the instruction of Congress, the Fed in 2011 limited the fees to 21 cents per transaction. A U.S. district court in July 2013 agreed with a group of retailers that lawmakers intended the cap to be lower and overturned the Fed’s rule.

The three-member panel of the U.S. Court of Appeals for the District of Columbia Circuit sided with the Fed on Friday, saying the law’s “ambiguity” gave regulators leeway to set a higher fee cap.

“Because neither agencies nor courts have authority to disregard the demands of even poorly drafted legislation, we must do our best to discern Congress’s intent,” the panel wrote in its opinion.

It said the rules “generally rest on reasonable constructions of the statute.”

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