Retailers could collect billions of dollars in debit-card interchange fees they were overcharged, a federal judge suggested at a hearing on Wednesday (Aug. 14), according to the Wall Street Journal.
U.S. District Judge Richard Leon, who threw out the Federal Reserve's 21-cent cap on debit-card transactions on July 31, also gave the Fed one week to tell him what its plan is for an interim rule on the debit cap. He ordered the Fed's general counsel, Scott Alvarez, to appear at a hearing next Wednesday (Aug. 21). "They've had their briefings. They know what the state of play is. It's time to make decisions," Leon said, according to a Bloomberg report.
Leon also laid out a timeline that would put a new, lower debit-fee cap in place by the end of August. While the Fed has 60 days to decide to appeal Leon's end-of-July ruling, the judge said he's not going to wait that long. "I'm not going to sit around and do nothing for 60 days," he said.
Leon had hinted that he would fast-track the new debit rules in July, when he said the Fed had "months, not years" to fix the problem.
But the possibility that retailers could be reimbursed for debit transaction overcharges—in the judge's words, "funds that have been collected but shouldn't have been"—was new on Wednesday. "There's a number out there somewhere that represents the amount of overcharge," he said, and told lawyers for both the Fed and the retailers who sued over the 21-cent cap to submit briefs on the question.
That doesn't guarantee merchants will be reimbursed for overcharges since the 21-cent cap went into effect, but it's clearly more than a hypothetical possibility. Because most retailers don't charge customers a separate "swipe fee" for using a credit or debit card for a purchase, any overcharge reimbursement would go directly to the retailer. In cases where a swipe fee is charged, things will get more complicated.
How serious is Judge Leon about his fast-track plan for adjusting the debit fee cap down and clearing up the problem? He made his impatience clear to the Fed's lawyers: "We're not putting a man on the moon here," he said, adding that the Fed's decision makers "can come back from Nantucket, come back from wherever they are on vacation, they can come into the board room and make a decision."
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