Overturning the Federal Reserve’s cap on debit interchange for large debit issuers will hurt credit unions, the industry’s two largest trade associations said Wednesday after a federal judge threw out the cap.

CUNA and NAFCU also signaled they may take the decision to an appeals court.


The regulations to implement the Durbin Amendment to the Dodd-Frank financial reform law set the cap at 21 cents per debit transaction for issuers with more than $10 billion in assets but ostensibly carved out an exception for issuers with fewer assets.

There are only four credit unions that large: BECU, Navy Federal, PenFed and North Carolina’s SECU.

There has been an active debate over whether or not the carve-out has been working.

CUNA General Counsel Eric Richard took a dim view of the decision of Wednesday’s decision by U.S. District Judge Richard Leon and signaled that it may appeal.

 “This decision will have a potentially devastating impact on the ability of small debit card issuers, particularly credit unions, to continue offering this vital payments service to their members and customers,” Richard said after taking a preliminary read of the opinion.

“The decision will, no doubt, challenge credit unions to continue their debit card programs without incurring drastic cuts in revenue, or imposing additional fees on their members – the last thing that credit unions want to do,” Richard said.

“Right now, the current debit interchange system remains the same. However, the court has signaled it is going to consider the current system further in the weeks to come. We are investigating our legal options on behalf of credit unions going forward,” he said.

CUNA and NAFCU are members of the Electronic Payments Coalition, an association of issuers and networks, banks and credit unions formed to defend card interchange and which has generally handled litigation. CUNA has also filed an amicus brief in this particular case.

NAFCU General Counsel Carrie Hunt also lamented the ruling and also indicated that NAFCU might appeal. “NAFCU has maintained, and continues to maintain, that the Fed’s rules on debit interchange fee standards and network exclusivity are reasonable and in keeping with its own authority under the law,” Hunt said.

“As it stands, the court’s ruling will have an irreparable, detrimental impact on credit unions’ ability to ensure their members receive the services they need. We are reviewing it to determine our next step,” she said.

Meanwhile, the EPC declined to comment on the ruling, deciding instead to let its members directly involved in the suit to speak out.

However, Chris Matthews, a spokesman for a coalition of financial institutions which had previously filed an amicus brief in the case, did comment.

“This is an extraordinary decision that will have major repercussions for customers of both small and large financial institutions,” Matthews said.

“The Fed’s rule was already causing consumer harm and now it looks like it will only get worse. If the past is any indication, the merchants will add even more to their $6 billion windfall, and consumers will still see none of the promised benefits,” he said.

Matthews was joined in his criticism by the chief spokesman for the nation’s small banks.

“It is disheartening that the retailers continue to add to their windfall while failing to live up to their promises of lower prices,” said Camden Fine, president/CEO of the Independent Community Bankers of America.

“While there is technically an exemption for certain financial institutions, community banks and their customers will be hurt by the Durbin Amendment’s price controls,” Fine said. “We’re very concerned that any new version of the caps will leave them in an even worse position.”