Retailers sue Fed over bank fee cap

Retail groups are suing the Federal Reserve, claiming the central bank didn't follow the law when it set a cap on fees that banks can charge merchants for handling debit card purchases.

The National Retail Federation and other groups charge in the suit that the Fed buckled under pressure from bank lobbyists when it set the cap at an average of about 24 cents per transaction in late June. The cap, which took effect Oct. 1, was initially proposed at 12 cents.

The merchant groups maintain that in raising the cap, the Fed considered expenses that the law did not allow. The law is part of the financial-regulatory reform passed in July 2010.

Banks lobbied hard against the rule, which cut fees that averaged around 44 cents per transaction.

The changes prompted banks to notify users of debit cards that they'd face a monthly surcharge for the convenience to compensate for the cap, which cut their revenue from retailers by billions. Banks later withdrew those announced fees after a consumer backlash.

But Tuesday, the Justice Department said it was reviewing allegations by Rep. Peter Welch (D-Vt.) that U.S. banks and their trade associations may have coordinated increases in debit-card fees in violation of antitrust laws.

Assistant Attorney General Ronald Weich wrote to Welch, "Please be assured that if it [the Justice Department] finds that individuals, banks or other parties may have violated the antitrust laws, the department will take appropriate action."

Welch in October called on the Justice Department to probe the banks.