U.S. Court of Appeals Denies Debit Interchange Fees Cap Requested by Retailers, Resulting in Win for Financial Institutions

On March 21, 2014, the U.S. Court of Appeals overturned a July 2013 ruling by Judge Richard J. Leon that lowered the cap on interchange fees allowed by financial institutions, signaling a win for credit unions issuing debit cards.

At the instruction of Congress in 2011, the Federal Reserve limited the fees to 21 cents per debit-card transaction. A U.S. district court in July 2013 sided with a group of lobbying retailers to lower the cap even further and overturned the Fed's rule.

The Fed originally incorporated network processing fees, costs to monitor transactions for fraud, and other expenses into the 21-cent cap. Merchants argued those costs were above and beyond what was allowed under the law.

Until further notice, the original 21-cent cap is instituted for all financial institutions.

Visit CSCU’s Insights on Interchange for more information.