retail news in context, analysis with attitude

The Federal Reserve said yesterday that it would appeal the decision by Judge Richard J. Leon of Federal District Court for the District of Columbia that said the Federal Reserve exceeded its authority when it set a 24 cent-per-transaction cap on debit card usage. The Fed had capped fees at 21 cents per transaction, much higher than the initial 12 cent cap it proposed, though half the average of 44 cents per transaction that traditionally has been charged.

Judge Leon also concluded that the card companies may need to reimburse retailers potentially billions of dollars in debit-card transaction fees he previously ruled were set too high.

According to the Times, "The appeal will be a crucial test of the courts’ power to overturn the financial regulations that stemmed from the sweeping banking overhaul after the crisis. In most instances, the courts have sought to change the new rules in ways that favor banks. But in this case, Judge Leon’s decision could diminish a lucrative revenue stream for banks and others. The Fed’s appeal could also stoke criticism that the central bank makes unnecessary concessions to the banking industry ... On Wednesday, it became clear that there was a potential outcome from the case that retailers would particularly want to avoid. If the Fed’s current rule ceases to have effect because of Judge Leon’s actions and the Fed puts nothing in its place, the banks would theoretically be free to increase fees above 21 cents a transaction. Representatives for both the banks and retailers said they favored a continuation of the 21-cent status quo while the case plays out."
KC's View:
It strikes me that this has less to do with the public interest than it has to do with the Federal Reserve trying to protect its institutional prerogatives. I continue to believe that the banks and credit card companies have crafted for themselves an unfair advantage over retailers and consumers, which isn't in the public interest. But in this case, at least, the public interest may not matter much.