Fed Appeals Debit Card Swipe Fee Ruling

by Christopher Freeburn | August 22, 2013 12:16 pm

visa mastercard 630 logos 300x199 Fed Appeals Debit Card Swipe Fee Ruling[1]The U.S. government has asked a federal court judge to keep current debit card swipe fees in place[2] while it appeals his decision striking them down.

U.S. District Court Judge Richard Leon indicated that he would leave the fees in place while he reviews the request for a longer stay filed by attorney for the Federal Reserve. The Fed is asking a higher court to overturn Leon’s ruling that the Fed improperly relied on restricted financial data when setting debit card swipe fee caps. The Fed has set a 21-cent maximum charge on debit card swipes. The judge also ruled that the Fed’s rules limited competition in the debit card market, Bloomberg noted.

Debit card issuers took a financial hit when the Fed imposed the fee cap in late 2011. Prior to the cap, banks charged an average of about 50 cents per swipe, generating $16 billion in annual revenue from the fees.

Leon’s ruling is a potential boon for MasterCard (MA[3]), which competes with market-leader Visa (V[4]) in the debit card business. About $1.14 trillion in debit card charges over the past year were processed through Visa cards, compared to just $467 billion for Mastercard debit cards.

The Fed’s law was challenged by a number of retailers.

Shares of Mastercard were flat on Thursday midday trading, while Visa slipped modestly.

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2012/08/visa-mastercard-630-logos.jpg
  2. to keep current debit card swipe fees in place: http://www.bloomberg.com/news/2013-08-21/fed-tells-judge-swipe-fee-rule-rejection-will-be-appealed.html
  3. MA: http://studio-5.financialcontent.com/investplace/quote?Symbol=MA
  4. V: http://studio-5.financialcontent.com/investplace/quote?Symbol=V

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