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Jan. 21, 2014 – A three-judge federal appeals court panel questioned merchants, the Federal Reserve and NAFCU coalition partners in Friday's oral arguments in the Federal Reserve's appeal of a July 31 district court ruling that found the Fed's debit interchange rule to be invalid.

Angela Meyster, NAFCU's regulatory affairs counsel, and Carrie Hunt, NAFCU's general counsel and senior vice president of government affairs, attended Friday's hearing.

Much of the discussion focused on what costs could be included in the Federal Reserve's rulemaking. Of note, the panel appeared to agree that the Fed, in setting its debit interchange fee cap, could take into account costs beyond the few specific ones explicitly provided in the Dodd-Frank Act. The district court did not take this view.

During questions on the "non-exclusivity" portions of the rule, the merchants expressed concern that Visa and Mastercard rules did not permit cross-routing of transactions. In their remarks, Federal Reserve representatives clarified that they believed any restriction was technology-based; they said the Fed's rule did not permit a purposeful restriction on cross-routing.

The court will issue a decision in the matter in the upcoming weeks and months.