Federal Judge Richard Leon’s decision to overturn a U.S. Federal Reserve rule on debit card interchange fees charged by banks represents a victory for retailers, and will likely force the Fed to reduce such fees. Leon ruled that the Fed did not do an adequate job of ensuring that the fees accurately reflected the actual cost of debit card transaction processing, as stipulated by the 2010 Dodd-Frank financial law. He says the Fed settled on higher fees than originally proposed by factoring in bank costs that were clearly disallowed by Congress. Several leading small-ticket item merchants had pressed the judge to reject the Fed rule, arguing that debit costs for small transactions had skyrocketed since it was enacted. However, Leon’s decision was criticized by the financial sector, which notes that debit fee caps have not spurred retailers to lower their prices. Meanwhile, Sen. Richard Durbin (D-Ill.) praised the ruling, and said it “will lead to lower interchange rates for billions of debit card transactions each year.” Debit fees will not be immediately affected by the ruling, as it provisionally delays enforcement of the decision. Leon has scheduled an Aug. 14 court date to discuss the next course of action, and suggests that he would give the Fed “months, not years” to remedy the regulations.
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