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Retailers have filed a new swipe fee lawsuit against the Federal Reserve, arguing that the cap took into account bank expenses that could not be considered under the law.
The retailers’ suit comes after the Federal Reserve capped swipe fees at 21 cents earlier this year. The central bank originally proposed swipe fees should be capped at 12 cents before changing their mind. Swipe fees averaged at 44 cents per transaction before the Federal Reserve’s new rules.
The swipe fee lawsuit alleges that merchants will be harmed by the new rules, which went into effect on October 1, according to Bloomberg.
Specifically, the lawsuit claims that the Federal Reserve failed to calculate the actual incremental cost incurred by banks from debit cards. They say that the Fed made up costs that weren't included in the statute, meaning they had free reign to come up with the 21 cent cap.
The suit says that the Federal Reserve went back on their original interpretation of the law: that only those expenses spent on the authorization, clearing and settlement of a transaction should be counted. The suit says the central bank used costs like fraud losses, which aren't covered by the law.
They maintain that the cap is an "unreasonable interpretation" of the law.
If the swipe fee lawsuit is successful, it could be a boon for small business owners who feel overwhelmed with rising costs. Businesses often want to take all forms of payment, including debit cards, in order to satisfy customers. But at the same time, having to pay so much to banks can be damaging to a company's bottom line.