Fed: Oh, you bet your bottom dollar we’re appealing that ruling on debit fee caps

posted at 1:01 pm on August 23, 2013 by Erika Johnsen

The other day, President Obama urged his financial regulators onward in the implementation of the Dodd-Frank Wall Street Reform and Consumer “Protection” Act — they are most humiliatingly behind on putting into practice even more top-heavy, market-distorting, economically damaging, and fundamentally flawed rules and restrictions, you see — but of the most insidious and controversial rules they have already come up and tried to implement is the minutiae of the oh-so-munificent Durbin Amendment.

This might surprise you, but in their infinite wisdom, the federal government actually purports to know better than debit-card companies themselves how much these companies should charge for debit-card swipe fees, a.k.a. interchange fees. The Durbin Amendment so magnanimously ventured that the government needs to set a cap on how much card issuers can charge merchants and comply with standards that they have arbitrarily deemed “reasonable and proportional to the actual cost.” I suppose we’re meant to overlook the fact that there are real transaction costs that need to be paid for, and that the processing price will inevitably be passed on to the consumer in one way or another — but whatever, who’s counting? Greedy banks! Free stuff!

Anyhow. In July, a judge struck down the Fed regulation that governs how much retailers have to pay to banks when customers swipe their debit cards — and the retailers were most pleased with the decision, because another rewrite could mean that they might have to pay even less for fees. (I might merely add that, in the meantime that this fight has been going on, banks have started to increase fees elsewhere and done away with things like “free” checking and rewards. Ahem.)

Via Bloomberg:

The U.S. Federal Reserve will appeal a judge’s decision that its rules on debit-card transaction fees and processing were illegal, a lawyer for the central bank said.

Visa Inc. (V), the world’s biggest payments network, climbed 3 percent to $178.39 in New York, the most in almost a month, as a successful appeal could help the company maintain its market-share lead. Smaller rival MasterCard Inc. (MA) slid 0.5 percent to $619.31.

The Fed’s general counsel, Scott Alvarez, told U.S. District Judge Richard Leon in Washington that the bank would file its case with the higher court today and asked the judge to keep the rules in effect as long as the appeal is pending.

Leon said he’d leave the current regulation in place at least while he considers the Fed’s request for the longer stay. The Fed is seeking to overturn Leon’s ruling that the central bank improperly 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.

Oh, geez. The overriding point here, of course, is that all of this uncertainty and the federal government’s dictates on private-sector market signals are accomplishing approximately nothing to help our economic fritz, and that I highly doubt the Dodd-Frank rules that have yet to be written and implemented are going to hold any less potential for special-interest ploys and market distortions. …And the beat goes on.

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all of this uncertainty and the federal government’s dictates on private-sector market signals are accomplishing approximately nothing to help our economic fritz, and that I highly doubt the Dodd-Frank rules that have yet to be written and implemented are going to hold any less potential for special-interest ploys and market distortions. …And the beat goes on.

Dodd-frank is nothing but a way to ensure companies bribe the politicians who set the rules. nothing more nothing less. We used to call this racketerring and extortion

unseen on August 23, 2013 at 1:15 PM

Since our Progressive Ruling class is salivating at the thought of 20 million poor Illegal Mexicans clamoring for OBAMACARE and free medical care………why not just give them all a Visa to go with it?

….and a car?………and a house?……..and food?

Aren’t these all rights? And why should anyone have to pay fees to use credit?

Least of all “those that can least afford it“.


Asked Thursday if the Affordable Care Act will help “undocumented individuals,” Health and Human Services Secretary Kathleen Sebelius said no — and that’s why immigration reform is so important:

“Well, the (Obamacare) bill is crafted in such a way that those who are undocumented will not have access to the tax credits or shopping in the (health insurance) marketplace. That has been limited, which is, frankly, why — another very keen reason why we need comprehensive immigration reform,” Sebelius told a gathering of Latinos in Philadelphia.

PappyD61 on August 23, 2013 at 1:18 PM


jawkneemusic on August 23, 2013 at 1:21 PM

The Dodd-Frank rules are written by the Limousine liberals who control Wall Street… One of the biggest hoaxes in American politics is that democrats are for the middle class and against the rich.. The democrats are not for the middle class but they are for the rich who support them and give them money like the Limousine liberals who have absolute control of Wall Street…

mnjg on August 23, 2013 at 1:28 PM

I hate what they are doing to our country. Let it burn!!

Deano1952 on August 23, 2013 at 1:29 PM

******************* BREAKING *********************************!!

Fort Hood shooting

Major Nidal Hasan found guilty on all counts in Fort Hood shooting spree – @NBCDFW

1 min ago from http://www.nbcdfw.com by editor

canopfor on August 23, 2013 at 1:41 PM

OT: Jihadist psycho psyciatrist guilty on all 45 counts. Death Sentencing Monday.

–Workplace violence will not be tolerated.

NOMOBO on August 23, 2013 at 1:41 PM

OT, Hasan convicted of premeditated murder.

Murphy9 on August 23, 2013 at 1:42 PM

Jinx buy me a Coke™

Murphy9 on August 23, 2013 at 1:43 PM

And when this fails, which it will, the liberals will claim that conservatives are fools for believing in the invisible hand of free enterprise, and that this failure justifies more regulation in the market.

Chris of Rights on August 23, 2013 at 1:46 PM

–Workplace violence will not be tolerated is frowned upon.

NOMOBO on August 23, 2013 at 1:41 PM

Fixed to reflect protected groups legal and media status.

ExpressoBold on August 23, 2013 at 1:51 PM

Tell me this whole argument about card fees couldn’t have come from any Democrat or maybe even…….their philosophical leader….


“Freedom in capitalist society always remains about the same as it was in ancient Greek republics: Freedom for slave owners.”

“Despair is typical of those who do not understand the causes of evil, see no way out, and are incapable of struggle.”

“There are decades where nothing happens; and there are weeks where decades happen.”

“A lie told often enough becomes the truth.”

“Without Revolutionary theory, there can be no Revolutionary Movement.”

“Give me just one generation of youth, and I’ll transform the whole world.”

“Sometimes – history needs a push.”

“Can a nation be free if it oppresses other nations? It cannot.”

“Unity is a great thing and a great slogan. But what the workers’ cause needs is the unity of Marxists, not unity between Marxists, and opponents and distorters of Marxism.”

“The best way to control the opposition is to lead it ourselves.”

“It is more pleasant and useful to go through the ‘experience of the revolution’ than to write about it. ”

“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”

“One man with a gun can control 100 without one. … Make mass searches and hold executions for found arms.”

“There are no morals in politics; the is only experience. A scoundrel may be of use because he is a scoundrel”

“During the lifetime of great revolutionaries, the oppressing classes constantly hounded them, received their theories with the most savage malice, the most furious hatred and the most unscrupulous campaigns of lies and slander. After their death, attempts are made to convert them into harmless icons, to canonize them, so to say, and to hallow their names to a certain extent for the “consolation” of the oppressed classes and with the object of duping the latter, while at the same time robbing the revolutionary theory of its substance, blunting its revolutionary edge and vulgarizing it.”

“Whenever the cause of the people is entrusted to professors, it is lost.”

“The intellectual forces of the workers and peasants are growing and getting stronger in their fight to overthrow the bourgeoisie and their accomplices, the educated classes, the lackeys of capital, who consider themselves the brains of the nation. In fact they are not its brains but its shit.”

“Imperialism: The final stage of Capitalism.”

“Communism is Soviet power plus the electrification of the whole country.”

“But suppose, for the sake of argument, free competition, without any sort of monopoly, would develop capitalism trade more rapidly. Is it not a fact that the more rapidly trade and capitalism develop, the greater is the concentration of production and capital which gives rise to monopoly?”

“We are not utopians, we do not “dream” of dispensing at once with all administration, with all subordination. These anarchist dreams, based upon incomprehension of the tasks of the proletarian dictatorship, are totally alien to Marxism, and, as a matter of fact, serve only to postpone the socialist revolution until people are different. No, we want the socialist revolution with people as they are now, with people who cannot dispense with subordination, control, and “foremen and accountants”.”

“Revolution can never be forecast; it cannot be foretold; it comes of itself. Revolution is brewing and is bound to flare up.”

“Human knowledge is not (or does not follow) a straight line, but a curve, which endlessly approximates a series of circles, a spiral. Any fragment, segment, section of this curve can be transformed (transformed one-sidedly) into an independent, complete, straight line, which then (if one does not see the wood for the trees) leads into the quagmire, into clerical obscurantism (where it is anchored by the class interests of the ruling classes).”

“Attention, must be devoted principally to raising the workers to the level of revolutionaries; it is not our task to descend to the level of the ‘working masses’.”

“Exchange, fair or unfair,always presupposes and includes the rule of the bourgeoisie.”

“Medicine is the keystone of the arch of socialism.”

“The goal of Socialism is Communism.”

Credit card fees, Obamacare, legalizing 20 million illegals and letting them bring their socialism with them from Mexico……hello Lenin…….we’re here.

PappyD61 on August 23, 2013 at 1:58 PM

Am I wrong in how I’m looking at this?

blink on August 23, 2013 at 2:03 PM

The whole shebangg is a clusterstuk. The luciferian progs have destroyed all confidence in the financial system. I’m just living day by day waiting for them to seize my 1’s and 0’s assets.

Murphy9 on August 23, 2013 at 2:06 PM

The really heinous part of this is that the Durban Amendment was shoved into Dodd-Frank almost literally at midnight just before it passed the Senate; it was never given a hearing in committee in either the House or Senate, and even Barney Frank opposed it. Debit interchange fees had nothing to do with the 2008 financial crisis or with safety and soundness of banks going forward. It was a pure rent-seeking effort by the retailers and a power play by Dick Durbin.

After the retailers got a $40 billion gift courtesy of this ridiculous Durbin amendment – exactly NONE of which they passed along to consumers, surprise surprise – they had the gall to go to court claiming that the fee cap set by the Fed was too high! (It lowered the rate from a high of about 45 cents to 21 cents or 10% of the transaction.) And a liberal judge agreed with them. In fact, the judge even threatened to force the banks to “disgorge” the “excessive” fees they had already charged and booked. (Absolutely nothing in the statute would allow for this, of course that never stops a liberal judge.)

Thanks to the Fed for appealing this ridiculous ruling.

rockmom on August 23, 2013 at 2:11 PM

Fifteen comments or bust!

My first reaction to hearing about this ruling was “I hope it stands”. There will be utter chaos but perhaps that is what is needed to wake people up.

As someone who works in this industry it is difficult to understate a) the devastating impact this will have on future payments innovation if it stands b) how patently idiotic this ruling is from a technology standpoint c) the cost of traditional banking services are about to rise significantly and d) that it will do nothing to help small mom and pop merchants. This is all being driven by the big box retailers with transaction processing infrastructures.

I set up debit card authorization strategies (ie. the conditions that a transaction must meet to be approved) for the financial institution that I work for. Fraud prevention is a huge component of those authorizations. And that fraud requires 24×7 monitoring by a complicated array of neural networks, servers and other hardware. Simply stating, as this robed moron did, that the Federal Reserve cannot consider fraud prevention, only Authorization, Clearance, and Settlement when determining fee caps, literally wipes out decades worth of capital investments in fraud detection systems.

Mike Honcho on August 23, 2013 at 2:13 PM

I don’t think there is a good guy here. It’s not as if the US Federal Reserve rejected the notion of setting fees in favor of free market pricing. It seems as if the retailer consortium wants the federal government to force low fees and the US Federal Reserve wants to maintain high fees. Neither is a free market approach.

Am I wrong in how I’m looking at this?

blink on August 23, 2013 at 2:03 PM

The Fed was required by law to issue regulations setting a cap on interchange fees. It had no choice in the matter. But it tried to be as realistic as possible in setting the cap, after it received reams of data from the banks and Visa/MC on actual costs of setting up and running the networks. The retailers claim the law allows only recovery of actual transaction costs, which they say is about 7 cents.

The whole thing is ridiculous, but Durbin got it into the law, so there it stands.

rockmom on August 23, 2013 at 2:14 PM

Mike Honcho on August 23, 2013 at 2:13 PM

Agree with everything in your post. I work on the regulatory affairs side of a bank, and this is driving us nuts. We are now going into budget season for next year, and if these fees get cut by another 2/3, it will certainly mean layoffs and branch closures, as we have already cut expenses to the bone over the last two years due to the initial revenue cuts from the fee cap.

No retailer has to accept debit cards. If they want the convenience for their customers of doing so, they need to pay for it.

rockmom on August 23, 2013 at 2:21 PM

A little off subject but has anybody heard any more about the 1% bank transaction tax?It is still out there lurking I hear and I am guessing Oslima will wait until after the midterms before using an EO to foist it upon us.

jeffinsjvca on August 23, 2013 at 2:23 PM

At this point, just what does it matter.
Under Shariah, all bank fees will be nullified.

Another Drew on August 23, 2013 at 2:29 PM

“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong…somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises…I say after eight years of this administration we have just as much unemployment as when we started…And an enormous debt to boot!”

—Henry Morgenthau, Treasury Secretary under FDR

Murphy9 on August 23, 2013 at 2:51 PM

We used to call this racketerring and extortion

unseen on August 23, 2013 at 1:15 PM

Some of us still do. Oh, bribery, too.

GWB on August 23, 2013 at 4:52 PM

For the totally clueless: The feckless Federal Reserve has ONE AND ONLY PRINCIPAL OBJECTIVE: maintain multi-billion profits for BIG BANKS and their financial industry cronies.

TeaPartyNation on August 23, 2013 at 5:08 PM

rockmom on August 23, 2013 at 2:21 PM

You reminded me of a great story. Years ago when the govt. regulated the price of gas at a meeting a VP of something told us they had an entire floor dedicated to trying to figure out the correct price under the regulations nation wide. They had to provide office space for two mandated govt. inspectors to verify their work. He said they had no chance because they weren’t sure they were right the regulations were so confusing.

CW20 on August 23, 2013 at 5:38 PM

If the credit card companies hadn’t constructed artful barriers to competition, I’d say that Erika has a point here.

But given that they have managed to build themselves into powerhouses and then use laws passed thereafter to block out competition, I’d say — you lie down with dogs, and you are liable to get up with fleas.

unclesmrgol on August 23, 2013 at 5:52 PM

This entire mess is UNCONSTITUTIONAL!

The Federal Reserve is a PRIVATE company! The Fed is NOT a part of ANY government!

It is UNCONSTITUTIONAL for congress to direct a PRIVATE company to issue ANY REGULATIONS! In this case, we are talking about TAXATION (through fees) without representation!

These merchants should also be sueing this entire mess as UNCONSTITUTIONAL. I suspect that they are afraid of federal actions against their private businesses if they were to dare to challenge this as an UNCONSTITUTIONAL act!

I also suspect that many of the ‘wanna be regulators who operate OUTSIDE of the government’ realize that they will be involved in MASSIVE lawsuits for most any action they take. Of course, since the Fed is NOT the government, it will be very easy to identify and sue the individuals involved in issueing these ‘regulations’.

Freddy on August 24, 2013 at 11:17 PM