Merchants defending U.S. District Court Judge Richard Leon's decision overturning the Federal Reserve's debit interchange regulation appear willing to accept approaches allowing credit unions to keep existing debit cards.
That side of the argument filed their brief in the ongoing case on Wednesday.
Leon's July 31 opinion against the Federal Reserve had left the door open to the possibility that credit unions and other debit issuers might have to reissue their debit cards carrying the brands of four different debit processing networks instead of the current two.
“While the Board could ensure compliance with this provision by requiring multiple unaffiliated networks for each method of authentication, it might choose to do so
through equally viable non-card based alternatives, such as taking down the prevailing, artificial wall between signature and PIN networks so that every network can process either type of transaction,” the merchants wrote in their argument filed Wednesday with the U.S. Court of Appeals for the District of Columbia Circuit.
However, the merchant coalition, which includes trade associations and individual large retail firms, did not abandon their argument that to conform with requirements of the Durbin amendment to the Dodd-Frank Act, the Federal Reserve would have to draft regulations that allowed merchants a choice of at least two networks to route each debit transaction.
It maintained that line of attack, but suggested that different avenues might be available to comply with the requirement.
“I think our position in the appeal brief reiterates our position before the district court,” explained Douglas Kantor, an attorney with the firm Steptoe and Johnson which represents some of the retailers in the case.
“We have long recognized that the Federal Reserve Board has some choices about how it implements the Durbin Amendment's requirements on network exclusivity,” he said, adding that if the Federal Reserve chose to do so by taking down the barriers between PIN and signature debit networks, the merchants would find that acceptable.
He also countered the notion that merchants and debit issuers were fighting over a transaction which is entering an era of declining popularity as the industry begins to move to chip-based EMV transactions.
Kantor pointed to the care he said Sen. Richard Durbin (D-Ill.) used when drafting the statute, not to tie it to any one method of authentication.
“No matter how they are authenticated,” he said, “they will still be debit transactions and still subject to the law.”
The Federal Reserve now has until Dec. 4 to file a response to the merchants’ argument and oral arguments have been scheduled for Jan. 17, 2014, by the appeals court.