The Federal Reserve Board has filed its appeal of U.S. District Judge Richard Leon's strongly worded July 31 decision gutting its debit interchange regulation.
The regulator argued that it had followed the law in requiring, for example, that debit issuers have two payment networks on each card and not just one and that the retailers who had filed the suit had misstated the law's requirement.
“The merchants’ insistence that the board should have required multiple routing options for each method of authentication enabled on a card, without regard to limitations imposed by consumers or merchants themselves, is based on a stilted reading of the statutory text and definitions, relies heavily upon an unreliable fragment of legislative
history, and ignores the substantial impact of the rule,” the Fed contended in its brief. “Even accepting that the merchants’ view represents one possible interpretation, it is not the best—and is certainly not the only—reading of the statute, which addresses only issuer and network restrictions on routing choice and is silent with respect to limitations caused by merchants or consumers. In these circumstances, the board’s reasonable interpretation must prevail,” the Fed argued.
The Fed also defended its looking at a broader view of costs when considering the cap on debit interchange, contending that a narrow definition of costs sought by retailers goes against the way Congress has used similar language and similar terms in the past.
The Fed also challenged the idea that it should have considered the intent of the amendment's sponsor, Sen. Richard Durbin (D-Ill.), more than other legislators when interpreting the law.
“The board correctly determined that a single floor statement by the bill’s sponsor
cannot be used to trump the statutory language chosen by all of Congress, and properly considered the similarities and differences between debit transactions and check,” the Fed wrote.
A coalition of credit union and bank trade associations, including NAFCU and CUNA, also filed a brief in support of the appeal.
"The court's current ruling, if upheld, would have a disastrous effect on credit unions' capacity to ensure their 96 million members receive the services they need," wrote Carrie Hunt, NAFCU's general counsel.
No date has been set for oral arguments in the case. Attorneys for the retailers have until Nov. 20 to file their arguments.