On October 16, the Federal Reserve Board (Fed) published a notice of an Open Board Meeting to take place on October 25. The only matter under consideration at that meeting will be the Fed’s proposed revisions to the debit interchange fee cap. Predictions are that the Fed is considering lowering that cap.
Whenever a customer uses a debit card to pay for an item, the merchant must pay an interchange fee to the bank that issued the debit card. Under the Durbin Amendment to the Dodd-Frank Act, the Fed is tasked with capping interchange fees for banks with over $10 billion in assets at a cost that is “reasonable and proportional to the cost incurred” by the bank. In 2011, the Fed set the interchange-fee cap at 21 cents per transaction plus .05% of the transaction cost. According to some merchants, that cap should be lowered.
As discussed here, late last month the U.S. Supreme Court granted the petition for certiorari in Corner Post, Inc. v. Board of Governors of the Federal Reserve System, a case where the plaintiff is challenging the interchange fee cap. Specifically, the issue before the Supreme Court involves the statute of limitations for the plaintiff’s Administrative Procedures Act claim.
Depending on the outcome of the October 25 meeting, the next step could be a public comment period on the proposed interchange fee cap change where both merchants and banks could submit their reactions to the proposed change. We will continue to monitor developments in this area.