Retailers won a huge victory on Wednesday as a judge ordered the Federal Reserve to lower the limits on swipe fees for debit card transactions.
U.S. District Judge Richard Leon struck down the 21-cent cap set by the Fed nearly two years ago as too high, saying the central bank had ignored the will of Congress.
"The Board has clearly disregarded Congress’s 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," Leon wrote in his ruling.
The judge ordered the cap to remain in place until the Fed completes new regulations or interim rules on swipe fees, but made clear that he wanted to see a new cap in “months, not years.”
The bank regulator could opt to appeal the ruling, and banks were eager to push it to continue the fight.
“We urge the Federal Reserve to pursue all legal means to mitigate the harm this decision will cause,” said Frank Keating, head of the American Bankers Association. “This result must be reversed.”
A Fed spokesman said the bank was reviewing the opinion.
The decision is the latest turn in a long-running, high stakes battle between banks and retailers over the "Durbin Amendment" that created the caps.
That provision, included in the Dodd-Frank financial reform law, requires the Fed to place limits on how much banks can charge retailers for debit-card transactions. The fees have been the source of a heated lobbying battle for years, with billions of dollars at stake.
The language of Dodd-Frank directs the Fed to set limits that are "reasonable and proportional" to the actual costs of transmitting a debit card transaction. Retailers had long argued that banks were reaping hefty amounts from fees that were well above what was needed to process a transaction.
But banks have argued the government has no business med