NAFCU supports overturning district court ruling on interchange
Oct. 22, 2013 – NAFCU and other amici on Monday filed a brief in favor of overturning a district court ruling invalidating the Federal Reserve Board’s debit interchange rule.
“NAFCU has been steadfast in its effort to preserve credit unions’ ability to serve their members by providing cost-effective card services,” said Carrie Hunt, NAFCU’s senior vice president of government affairs and general counsel.
The Fed, in its own brief Monday, urged the U.S. Court of Appeals for the District of Columbia Circuit to reject the district court ruling. The Fed is seeking to preserve its final rule.
While supportive of the lower court decision being overturned, NAFCU wants to see the board’s cap on debit interchange fees raised. The Fed’s final rule limits debit interchange fees to 21 cents per transaction plus 1 cent for fraud costs. This cap applies to debit card issuers having more than $10 billion in assets, but NAFCU has previously noted that fees to smaller institutions are already on the decline and are expected to drop further due to market forces.
NAFCU and other amici made this point in the brief, saying that the board “promulgated a Final Rule that, while an improvement over its first proposal, improperly sets interchange fees equal to only a portion of the issuer’s transaction cost and thus fails to incorporate a reasonable rate of return above that cost.”
The district court ruling also declared the Fed’s prohibitions on network exclusivity, which apply to all debit card issuers, to be inadequate.
The briefing says: “The district court’s desired regime would require massive change to payment systems at nearly every level. Networks, issuers, acquirers, and merchants would need to retrofit their systems (with technological improvements yet to be developed), and issuers would need to reissue hundreds of millions of debit cards – all to the tune of hundreds of millions of dollars in costs.”
The Fed’s debit interchange regulation will remain in effect throughout the appeal process. Merchants, the plaintiffs in this suit, have until Nov. 20 to file their response to the Fed, and the Fed will have until Dec. 4 to respond to that.