The U.S. Federal Reserve’s rules for debit-card transaction fees and processing will remain in place while the central bank appeals a decision throwing out the regulations, a judge said.
Both the Fed and retailers had asked the federal judge in Washington to keep the current rules in place pending the appeal.
“Upon consideration of those pleadings, oral arguments and the entire record, I conclude that the stay should remain in place while our Circuit Court reviews my decision,” U.S. District Judge Richard Leon wrote in the ruling entered today.
Merchants “vastly prefer the status quo” to the “unregulated ‘free for all’ which would likely subject merchants to interchange fees well in excess of the Fed’s current standard,” lawyers for retail interests said in court filings Aug. 28.
The merchants’ filing was in support of the Fed’s Aug. 26 request that the rules be left in place pending the central bank’s appeal.
The Fed is seeking to reverse Leon’s ruling that it wrongly set the cap on debit-card transaction fees, known as swipe fees, at about 21 cents for each transaction, and neglected to bolster competition among payment networks.
Leon’s decision, unless overturned on appeal, will force regulators to revisit rules that bankers said would cost them 45 percent of their swipe-fee revenue. Lenders collected about $16 billion annually from those fees before the Fed’s regulation and responded by cutting back on perks such as rewards programs and free checking to soften the blow to their profits.
The case is NACS v. Board of Governors of the Federal Reserve System, 11-cv-02075, U.S. District Court, District of Columbia (Washington).