Chains Form Coalition Opposing High Swipe Fees

More than half a dozen restaurant and convenience-store chains have jointly filed an amicus brief supporting a lawsuit against the Federal Reserve regarding high swipe fees charged by major banks.

CKE, parent of Hardee’s and Carl’s Jr., joins Auntie Anne’s, Burger King, International Dairy Queen, Jack in the Box, Starbucks Corp., The Wendy’s Co., and 7-Eleven in a coalition representing thousands of small-businesses which accept debit transactions that are almost exclusively $15 or less. Quick-service restaurants are the fastest-growing debit segment.

The pending lawsuit was filed in federal court last November by the National Retail Federation, and other trade groups. The suit states that the Federal Reserve failed to follow key requirements of a 2010 law when it adopted a flawed cap on debit-card swipe fees that took effect last fall. According to the suit, the groups say the failure has allowed big banks to continue charging unjustifiably high swipe fees and has discouraged price competition among credit-card networks. The impact of anticipated increases will intensify over time as more customers use debit cards for small-ticket transactions.

"Congress originally passed this law to cap swipe fees. Unfortunately, instead of creating a competitive environment that would benefit small-business owners—and ultimately consumers—the swipe fees charged by big banks have climbed dramatically higher for quick-service restaurants," said Andrew Puzder, CEO of CKE. "Big banks are profiting, while consumers and small business are losing during a time of economic distress."

Sen. Dick Durbin (D.-Ill.), who sponsored the original legislation, has also signed on to the lawsuit, claiming the bill’s intent was misinterpreted by the Federal Reserve. The Durbin Amendment required the Fed to issue regulations ensuring debit-card swipe fees were "reasonable and proportional" to the cost of processing debit transactions. The lawsuit aims to improve the Fed’s rule, rather than stop its implementation.