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Tennis, anyone?

By: Kari English

I understand that interchange fees are a critical source of revenue for institutions and I in no way, shape or form want to diminish the significance of the current events playing out in regard to these fees. But I have to admit that I am beginning to feel as though I’m watching a tennis match.

After all, the controversy over the rates of interchange fees started with the initial serve by Senator Dick Durbin, D-Ill., when he proposed the Durbin Amendment to cap interchange fees.

While the Durbin Amendment has many opponents, the only one known to formally challenge it is Bill Cooper, the chairman and CEO of TCF Financial Corp., which is based in Wayzata, Minn., and is the holding company for TCF National, Sioux Falls, S.D. In October 2010, Cooper challenged the constitutionality of the Durbin Amendment by suing the Federal Reserve after it proposed capping the fees at 12 cents. TCF claims that it will have to provide debit cards at below-cost and that the Durbin Amendment will deny banks “a fair return on invested capital.”

The Federal Reserve Board of Governors returned TCF’s shot by asking a federal judge to dismiss the suit arguing that “TCF’s claims of irreparable harm from the proposed fee cap are ‘highly speculative,’ and do not compare to the harm that retailers and consumers would face if the current debit-card fees remained in place,” according to court documents filed in late February.

But TCF volleyed back by countering the Department of Justice’s motion to dismiss with additional documentation and support for TCF’s motion for a preliminary injunction, which will be heard on April 4 in Sioux Falls, S.D.

In the meantime, other banking industry organizations that were sitting on the sidelines watching these events unfold have finally spoken out in support of TCF by filing an amicus brief stating why they support TCF and its claims. Some of the groups cheering TCF on include The Clearing House Association, the American Bankers Association, the Consumer Bankers Association, the Credit Union National Association, the Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America and the National Association of Federal Credit Unions.

And TCF’s fan club seems to be growing. On March 15, a bipartisan coalition of senators introduced the Debit Interchange Fee Study Act in response to concerns of the impact of the Fed’s proposed rule on consumers and small businesses. The legislation calls for a two-year time-out to study the potential effects of the proposal further.

For Cooper to challenge the Durbin Amendment took gumption. And while at the beginning his odds of winning looked slim, he appears to be a fierce competitor and his odds are getting better. For the rest of the fans still in the stands, we will just have to continue to watch how the match plays out to learn who is the victor.

To read more about TCF’s lawsuit, the amicus brief and the Debit Interchange Fee Study Act, click the links below.

TCF Lawsuit

Amicus Brief

Delaying the Durbin Amendment

Kari English is senior editor of BankNews.

Copyright © April 2011 BankNews Media

Copyright © April 2011 BankNews Media