TCF National Bank, the financial institution that has sued the Federal Reserve over its proposed debit interchange rule, has based their argument against the rule in part on the rule's small issuer exemption.
The legislation mandating the cap sought to exempt debit card issuers with under $10 million in assets from having to comply with the cap. In its most recent brief, TCF argues that the exemption renders an already confiscatory law unjust as well as unconstitutional.
“The theory is that, by exempting smaller banks, Congress ‘insulat[ed] consumers from possible cessation of [debit] services by small banks unable to absorb the increased costs associated with lower interchange fees.’ We think this proves too much. It is another way of saying that the rate cuts driven by the Durbin Amendment are so Draconian that they could drive small banks out of the debit business and thereby hurt consumers who want debit cards from those banks, but it is entirely proper that larger banks suffer the same fate, and who cares about their customers who want debit cards,” the bank argued, concluding the argument by way of an analogy.
“Could Congress knock the price of milk down 80 percent and then exempt all but the 60 largest dairies in the country? Would the hypothetical opportunity to raise butter or cheese prices save such a law from unconstitutionality?” the bank asked.