On Tuesday, the Supreme Court declined, without comment, to hear an appeal of a lower court ruling upholding the Federal Reserve's current regulatory regime overseeing debit interchange.
The decision means the current debit interchange rates and rules will stand until the Fed changes them or until retailers and debit card issuers or financial institutions musters enough political support in Congress to change them.
Reactions to the decision largely depended on the positions these groups brought into the case.
Retailers used the decision to continue to attack the rule as violating Congressional intent while credit unions offered qualified approval since they strongly opposed the legislation underpinning the rule and much of the resulting regulation.
"The court's decision is disappointing because it leaves merchants and their customers paying far more than intended by Congress," Mallory Duncan, National Retail Federation SVP and general counsel, said. "Federal agencies have flexibility in implementing our nation's laws, but do not have the discretion to blatantly ignore the wishes of elected officials and the clear language of the statute. The court's ruling means retailers will keep paying billions of dollars more than they should, and that fee-hungry banks will continue to rake in unearned profits that ultimately come out of consumers' pockets. We will continue to press the issue."
CUNA and NAFCU praised the ruling primarily as a source of stability for credit unions but still argued the debit interchange rate remained too low.
"NAFCU is pleased the Supreme Court will not reconsider the court of appeals decision in NACS vs. Board of Governors of the Federal Reserve. This will help maintain stability in the marketplace, which is good for consumers and credit union members," NAFCU General Counsel Carrie Hunt said. "NAFCU remains concerned that the current interchange cap imposes below-cost caps on interchange fees and fails to provide for a reasonable return for credit unions. We will continue to vigorously support a fair interchange fee for credit unions."
CUNA President/CEO Jim Nussle said the Supreme Court made the correct decision for credit unions and consumers when it refused to hear the case.
"The Fed's rules aren't perfect for credit unions – but after years of fighting, we appreciate the ability to move forward," Nussle said.
Retailers had argued Congress' intent in the Dodd-Frank Act, which authorized the rule, was to keep interchange at about the same cost as processing checks and the Fed's rule should reflect that understanding.
Debit card issuers, including credit unions, had countered that such a low level of interchange would be far less than the cost to provide debit cards and process transactions.
In the end, the Fed's rule roughly split the difference between the two decisions, leaving each only partially satisfied and leading retailers to sue.
The initial decision at the District Court level went to the retailers. Debit card issuers appealed that decision and won. Had they taken the case, the Supreme Court would have decided whether to uphold that appeals court decision.
With the debit interchange question settled for at least the time being, attention may turn to credit card interchange, according to retailers.
Various retail groups have also been waging court fights about credit card interchange but have not had language in statute establishing its regulation.
Duncan alluded to the shift in the fight.
"Banks will benefit from this ruling but the battle over swipe fees isn't over," he said. "There is still litigation pending on credit card swipe fees, and policymakers continue to be concerned by the anti-consumer and anti-competitive practices of the card industry."
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