Bankers call it a "windfall" for retailers, while merchants call it a chance to set "wrongs right." Either way, a late July decision by U.S. District Judge Richard Leon could impact consumers who use traditional bank accounts with linked debit cards. Judge Leon struck down a Federal Reserve rule that capped debit card processing fees at 21 cents, plus a very small percentage of each transaction to cover fraud prevention efforts.

The Fed imposed the rule in response to the Durbin Amendment of the Dodd-Frank Act, a piece of legislation originally designed to protect consumers from excessive bank fees. After its implementation in October 2011, the rule shifted the average debit card processing charge from 40 cents to about 24 cents.

According to court documents, Judge Leon called the rate cap "arbitrary and capricious," stating that the Fed overstepped its bounds by setting a rate that considered bank costs not covered by the Durbin Amendment. The judge directed the Fed to revisit its decision by setting a lower rate in line with processing costs and to lift restrictions that may have hampered competition among debit processing networks. Many prepaid debit cards, such as those issued by American Express under the Bluebird and Serve brand names, fall outside the scope of the Durbin Amendment.

The Fed's rate cap decision created two unintended consequences. First, many fast food and gas station owners watched their interchange fees climb. Like other vendors with small average transaction amounts, they had negotiated deeply discounted interchange fees with payment processors. Once the cap took effect, most processors abandoned discounts in favor of the maximum fee. The following spring, Visa and MasterCard instituted flat annual service fees of up to $85 per location to connect merchants to debit processing networks. The charges added up quickly for large retail chains and operators of franchised restaurants.

In a statement to reporters, National Retail Federation spokesman Mallory Duncan applauded the judge's ruling. "Today's decision is the first step in setting these initial wrongs right and will ensure that swipe fee reform is done correctly," Duncan said. Meanwhile, Electronic Payments Coalition spokesman Chris Matthews criticized Judge Leon's direction to lower the cap further. "If the past is any indication, the merchants will add even more to their $6 billion windfall, and consumers will still see none of the promised benefits," Matthews said. Judge Leon set a conference for August 14 to brief affected parties on a path to comply with the law as passed.