SCOTUS Should Settle Durbin Amendment Discrepancies

Last Friday, the Retail Litigation Center filed an amicus brief urging the Supreme Court of the United States to grant certiorari and address errors made by the U.S. Court of Appeals for the D.C. Circuit.  In its decision, the D.C. Circuit upheld the current debit swipe fee rule issued by the Board of Governors of the Federal Reserve, even though it does not comport with the statutory language of the Durbin Amendment that called for its creation.

At stake in NACS v. Federal Reserve System is the debit card share of the more than $4 billion dollars in network routing fees that the Visa/MasterCard duopoly charges to merchants each year. The Durbin Amendment to the Dodd-Frank reform bill sought to provide relief to the businesses and consumers that bore the brunt of the fees by directing the Federal Reserve to write a rule allowing cards to recoup only a limited subset of the costs associated with each debit transaction from retailers.

An earlier decision by the district court invalidated the rule because the court found that the Federal Reserve allowed recovery of costs that Congress expressly excluded.  That decision was reversed by the D.C. Circuit.

"The D.C. Circuit gave an improper level of deference to the Federal Reserve's rulemaking," said RLC President Deborah White. "Allowing the Federal Reserve to consider costs to payment network operators expressly prohibited by the statute in determining the fees will pass billions of dollars in unnecessary charges to consumers, hurting retailers in the process. The Supreme Court should take this opportunity to underscore the importance of compliance with the statute and direct the Federal Reserve to rewrite the rule."

From the brief filed with the Supreme Court:

"In 2009 alone, retailers paid in excess of $4.1 billion in network routing fees for debit transactions, which fees are then often passed on to consumers. This is a substantial, inflated, and unnecessary drain on the resources of the RLC's members and their customers, largely a consequence of the lack of competition for debit card acceptance in the United States, and the dominance of Visa and MasterCard in that market."

"The job of the court of appeals in this case was to review the Federal Reserve's interpretation of Section 920(a)(4)(B)(ii)'s straightforward directive not to consider 'other costs incurred by an issuer which are not specific to a particular electronic debit transaction' when deciding on the appropriate fee for debit interchange.  The court applied a 'special deference' standard to do so, based on its determination that the Board engaged in 'ratemaking.' This was error."

"The D.C. Circuit admitted that the "merchants' argument certainly has some persuasive power," noting that the plain meaning of "specific" and "particular" would generally preclude the Board's interpretation.  Id. (providing, as a hypothetical, that no one would claim a shoe store's rent is "somehow 'specific' to a 'particular' shoe sale"). Yet it erroneously rejected the argument, for reasons that have little support either in the record or the law, while improperly applying an inflated level of deference reserved for ratemaking – an activity that the Board itself repeatedly disclaimed undertaking in this situation."

The complete brief, written by Emery Celli Brinckerhoff & Abady LLP attorneys Debra L. Greenberger and Andrew G. Celli Jr., can be read here.



The Retail Litigation Center is a public policy organization that identifies and engages in legal proceedings which affect the retail industry.  The RLC, whose members include some of the country's largest retailers, was formed to provide courts with retail industry perspectives on significant legal issues, and highlight the potential industry-wide consequences of legal principles that may be determined in pending cases.


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