An irate judge threw the Federal Reserve another curve ball during an Aug. 14 hearing when he gave the regulator until Aug. 21 to persuade the court why its 21-cent interchange debit cap should not end.
Judge Richard Leon also chastised the Fed during the hearing for not being ready to discuss when it could put a new rule in place.
Leon presides over U.S District Court for the District of Columbia, where the hearing took place.
“The Fed does not have the luxury of weeks to come up with a decision. I would have thought this would have been a priority matter,” Leon told Fed attorneys. “They can come back from Nantucket or off vacation to deal with this, or do it by conference call.”
Lawyers for the Federal Reserve, the merchant plaintiffs and financial institutions have to appear again before Leon Aug. 21 to address the question.
Katherine Wheatley, associate general counsel for the Federal Reserve who represented the agency, tried to explain that the Fed had been prepared to set a schedule for making a decision about how to approach crafting a new rule, but Leon interrupted her.
“You know that stay ended today, right?” he asked. “I expected that the Federal Reserve would have had a position by now,” he said, adding that it appeared the Fed had not paid sufficient attention to the issue.
Leon also threw the court a curve ball when he asked plaintiff attorneys whether they had any thoughts about damages and “overcharges” suffered since the current debit interchange rule has been place.
Next Page: 'Number Out There Somewhere'
Shannen Coffin, of the Washington-based law firm Steptoe and Johnson, replied that they had not done so and would need time to come up with a figure.
“But surely a number is out there somewhere,” Leon said.
Coffin replied that there was, and that it could be as high $40 billion.
Later Leon asked Wheatley and Seth Waxman, an attorney with the Washington-based firm Wilmer, Cutler, Pickering Hale and Dorr, their opinions on damages.
Waxman represented CUNA, NAFCU and other financial institutions signatories in an amicus brief filed earlier in the case.
Wheatley said the Federal Reserve didn’t yet have an opinion.
Waxman said the merchants had not asked for damages, that the court lacked the authority to order damages, and that his clients had merely been following the law to the best of their ability.
Leon replied that he looked forward to reading Waxman’s opinions on Aug. 28, when briefs on the damages question are due. He also granted permission for Waxman to prepare arguments on the question of what the Federal Reserve should do about an interim final rule, and additionally granted him permission to participate in the Aug. 21 hearing.
“This is a very fast turn-around for the Fed which will, on the one hand, eliminate any uncertainty about the future—but will also potentially mean an impact on credit unions sooner than later,” said CUNA CEO Bill Cheney. “CUNA will continue to follow the progress of debit interchange. It is a serious issue for credit unions and we are exploring a variety of options to ensure credit unions’ interests are protected in any changes to the debit interchange regulation.”
NAFCU General Counsel Carrie Hunt said her association was closely tracking the situation to protect its members’ interests, but declined to comment on the hearing’s tone or whether NAFCU would prepare a damages brief.
Mallory Duncan, general counsel for the National Retail Federation, one of the plaintiffs in the case, said he was very pleased to “see the court light a fire under the Fed.”
“These fees have been driving up prices for merchants and their customers for years, and every day that it continues is one day too long,” he said. “The court is absolutely correct that this is a multi-billion-dollar issue with huge implications for the U.S. economy, and needs to be dealt with immediately.”
Duncan did not comment on the potential for merchants to recover damages.