NEW YORK, March 11, 2011 /PRNewswire/ -- An unprecedented, unified coalition of every major nationwide bank and credit union trade association joined together today to file a friend-of-the-court brief in strong support of TCF National Bank's legal challenge to confiscatory, below-cost caps on debit card interchange fees.
The associations' brief submits that the Federal Reserve Board's proposed rule erroneously interprets the debit card interchange fee provisions of the Durbin Amendment. The statute requires the Board to establish standards for determining whether an interchange fee is "reasonable and proportional" to a debit card issuer's costs. But the Board acted contrary to that directive, instead proposing a harsh, one-size-fits-all price cap of 12 cents per transaction—an amount the Board itself acknowledges is far below debit card issuers' actual costs and does not allow for any return on the issuers' substantial investments in their debit card businesses.
The associations' brief explains that the consequences of this below-cost price cap would be severe for banks, credit unions and consumers. Even the Acting Comptroller of the Currency—who is a defendant in TCF's case—has told the Board that its rule has long-term consequences for the safety and soundness of banks and credit unions of all sizes. Moreover, the Department of Justice has acknowledged, in this very case, that the Board's approach is not required by the statute.
If the Board's rule were to take effect, it would reduce interchange fee revenues by as much as 80 percent, cutting the revenues of banks and credit unions by approximately $12 billion per year. It would also result in increased banking fees and costs for consumers; deprive significant numbers of Americans (particularly low-income Americans) of access to the reliable, convenient, secure, and efficient debit card method of payment; and have a detrimental effect on the electronic payments system for transactions that amount to literally trillions of dollars of economic activity every year.
The associations joining the brief are The Clearing House Association, American Bankers Association, Consumer Bankers Association, Credit Union National Association, Mid-Size Bank Coalition of America, The Financial Services Roundtable, Independent Community Bankers of America and National Association of Federal Credit Unions.
TCF's lawsuit is currently pending in the United States District Court for the District of South Dakota.
A copy of the associations' brief is available here:
Steve Frankel / James Golden
Joele Frank, Wilkinson Brimmer Katcher
SOURCE The Clearing House Association