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Judge leaves TCF interchange suit open for now
WASHINGTON (4/5/11)—In an action that leaves open the opportunity to challenge the Federal Reserve Board's debit interchange rule once it is issued, a federal court declined to dismiss TCF National Bank's (TCF) suit against the Fed--but also declined to issue an injunction based on the statute. Credit Union National Association (CUNA) General Counsel Eric Richard said that Monday’s developments were “just one step in a long legal process and CUNA will continue to be a part of that process.” The legal work will go forward, especially after the Fed issues its regulations under the Interchange Amendment – but the Fed’s announcement last week about its inability to meet the April 21 rule deadline makes the timing highly uncertain,” he added. The Fed’s interchange fee rate cap regulations, which could lower interchange fees to as low as seven cents per transaction, are set to go into effect on July 21. A final version of a proposal is expected to be offered before that effective date, even though the Fed last week said that it would not meet the statutory April 21 deadline for a proposal. Monday’s court action followed the first round of oral arguments in TCF’s lawsuit against the debit card interchange fee provisions of the Dodd-Frank Act. The arguments were heard in U.S. District Court for the District of South Dakota by Judge Lawrence Piersol. Credit Union Association of the Dakotas’ Director of Compliance Amy Kleinschmit, who attended the hearing, noted that a large media contingent was part of the fully packed courtroom. The TCF suit, which was filed last October, alleges that portions of the Dodd-Frank Act that would require the Federal Reserve to set restrictions on debit card interchange fees are unconstitutional. Specifically, the suit states that the government cannot write laws that would force a given business to take a loss on one of its various business operations. TCF also argues that the Fed's implementation plan restricts a financial institution's ability to recover costs associated with providing the debit card service. CUNA, the Clearing House Association L.L.C., American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions have backed TCF in its suit. CUNA and the other groups are backing TCF in an effort to explain the detrimental effect that the Fed's interchange provisions would have on the "stability of the electronic payment structure that undergirds literally trillions of dollars of our economy, as well as the serious constitutional issues the (Fed's) action raises." CUNA is also encouraging legislators to tell the Fed to stop, study and start over on the interchange proposal.


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