Friday a U.S. federal appeals court upheld the Federal Reserve's 21-cent cap on the so-called swipe fees banks are allowed to charge retailers for debit card transactions.
The decision comes amid a challenge to another ruling from July last year when a federal judge overturned the Fed's cap on the swipe fees — saying the cap was too high due to the government improperly inflating the fees. (Via American Bankers Association)
The Dodd-Frank financial law passed in 2010 requires the fees to reflect the cost of processing the transactions. The government initially proposed a 12-cent cap per transaction but then settled on the 21-cent cap in effect today.
The move is seen as a setback for retailers who had argued the cap should be lowered due to the financial crisis, when fees averaged about 40 cents per transaction — a price that's usually passed on to the consumer. (Via Fox Business)
Businesses that typically offer less costly items per transaction, such as McDonald's, Starbucks and Burger King, stand to lose the most over this ruling. (Via McDonald's)
But banks say they need the fees in order to continue providing services such as checking accounts to consumers. One financial executive told The Washington Post, "Any further changes to the currently allowed interchange rates would only pile on the negative consequences for consumers."
Ultimately, regardless of whether swipe fees increase or decrease, the costs will most likely continue trickling down to the consumer.
In this case, consumers won't see any changes. In fact, CNN reports it's not even clear whether consumers saved any money after the implementation of the 21-cent cap in 2011.
The ruling also affects card processors such as Visa, whose shares rose 4 percent Friday.