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The National Retail Federation, the Food Marketing Institute, the National Association of Convenience Stores and two retailers filed a lawsuit in federal court today saying the Federal Reserve failed to follow key requirements of a 2010 law when it adopted a flawed cap on debit card swipe fees that took effect this fall.  NRF and the other groups say the failure has allowed big banks to continue charging unjustifiably high swipe fees and has discouraged price competition among credit card networks.

The regulations, which took effect October 1, have also led to an increase in swipe fees for some small-ticket purchases, the lawsuit says. The suit was brought by NRF on behalf of both NRF and its National Council of Chain Restaurants division, which filed comments with the Fed earlier this year warning of the potential impact on small purchases. In addition to FMI and NACS, other plaintiffs include NRF member Boscov’s Department Store, based in Reading, Pa., and NACS member Miller Oil Co., a convenience store/gas station chain based in Norfolk, Va.

According to the plaintiffs, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required the Federal Reserve to set guidelines that would result in debit card swipe fees that are “reasonable” and “proportional” to banks’ costs in processing debit card transactions. Financial institutions with less than $10 billion in assets were exemp

Frank Keating, president and CEO of the American Bankers Association, issued the following statement: “It is disgraceful that our nation’s big-box retailers are suing the Fed over their own Durbin amendment, which chopped bank interchange revenues in half and provided them a $7 billion windfall in profits annually. Now these giant retailers are back at the trough seeking more profits from government price controls, while their customers search in vain for the savings they promised to pass along but have failed to deliver. Retailers continue to enjoy the benefits of debit cards – faster checkout, customer convenience, lower fraud costs – yet clearly they don’t want to pay for it or keep their promises to U.S. consumers.”

Check dodd-frank.com frequently for updates on the Dodd-Frank Act and other important securities law matters.

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