Federal Judge Nullifies Fed's Swipe Fee Regulation

A U.S. federal judge in North Dakota has vacated the Federal Reserve's regulation on swipe fees, a contentious cap on what banks charge merchants for processing debit transactions. This decision, favoring retailers, won't be effective immediately, allowing time for the Federal Reserve to appeal the ruling.

The judgment is a pivotal moment in the long-standing conflict between banks and retailers over the fees, which merchants argue reduce their revenue. In contrast, banks maintain that the caps inadequately cover transaction costs. Both parties may eventually escalate this legal dispute to the U.S. Supreme Court.

In the legal proceedings, the federal judge declared that the Federal Reserve's rule exceeded its authority, with particular reference to Regulation II. This adds a new chapter to the case, first dismissed on timing grounds but revived by the Supreme Court, highlighting the power struggles over federal regulation.

(With inputs from agencies.)