TCF Bank Drops Interchange Lawsuit Against Fed
TFC Bank on Thursday asked a federal judge to withdraw its lawsuit against the Federal Reserve challenging the legality of the Durbin Amendment.
The Minnesota bank’s move came a day after the Federal Reserve issued its final rule setting a 21-cent cap on debit interchange fees plus a an approximately four-cent allowance for fraud prevention and losses, and a federal appeals court in St. Louis dismissed the bank’s request to delay the implementation of the Durbin Amendment.
"While we continue to believe that the Durbin Amendment is unconstitutional because it requires below-cost pricing and exempts 99% of all U.S. banks, we believe our lawsuit has served its purpose in demonstrating the unfairness of the Durbin Amendment and that it is time for us to move on," William A. Cooper, the bank’s chairman and CEO said in a statement. "The Federal Reserve Board's final rule is an improvement from its initial proposal and recognizes many of the points we made in our case."
Both CUNA and NAFCU signed two friend-of-the -court briefs on behalf of TCF, which has branches throughout the Midwest.
The Durbin Amendment, which was part of the financial overhaul bill passed by Congress last year, mandated that the Fed write a rule limiting interchange fees on debit card transactions.
The Fed’s proposed rule would have capped the fees at 12 cents per transaction with no allowance for fraud prevention. The final issued Wednesday took some of the recommendations by credit unions and banks to allow for fraud prevention.
The rule takes effect on Oct. 1.
Financial service institutions and retailers criticized the Fed rule. Credit unions and small banks said they fear that the Fed won’t be able to ensure that the exemption for institutions with assets of $10 billion or less will be protected.
Retailers said the interchange fee is still too high.