SIOUX FALLS, S.D. – Minnesota’s TCF Bank filed a an expedited appeal request yesterday with the U.S. Court of Appeals for the Eighth Circuit asking the court to overturn a lower court’s ruling and to block the Federal Reserve’s pending implementation of the Durbin amendment’s debit fee caps.
The $15 billion bank asked the court to speed the appeals process because of the pending July 21 implementation date of the debit rule, saying if the court does not rule the bank will suffer “irreparable harm and unrecoverable revenue losses, even if the Durbin Amendment is later declared unconstitutional.” “Other banks that issue debit cards and must honor the rate cuts will also suffer huge, unrecoverable revenue losses,” said the bank in its court brief. “The entire debit system, upon which Americans have come to rely as the primary payment alternative to cash, will be jeopardized by the drastic, Draconian rate cuts imposed on regulated banks by the Durbin Amendment.”
Credit unions have joined the banks in asking a federal court in South Dakota, where TCF is incorporated, to block the Fed’s action, which they say amounts to an unconstitutional taking of their property. But the lower court on April 4 denied the banks’ and credit union’s request for a temporary injunction to block the Fed from passing a final rule.
The request for an expedited appeal comes as the Congress is mulling legislation to delay implementation of the debit rule for as long as two years while the Fed conducts a comprehensive study on its potential impacts. But the prospects for a congressional delay are questionable, as Congress adjourned yesterday for a three-week recess and Illinois Sen. Richard Durbin, the author of the debit fee amendment, has vowed to do everything he can to defeat the delay.
A preliminary proposal issued for comment by the Fed in December would cut debit fees paid by merchants to banks and credit unions from $20 billion last year by as much as two-thirds. CUNA estimates that could amount to a cut of as much as $1.6 billion on the $2.6 billion in debit fees earned by credit unions in 2010.
TCF painted a dire picture of the Fed’s proposal, telling the appeals court it would cut its debit fees from $104 million a year, or $8 million a month, to either $15 million or $21 million. “Thus,” said the Minnesota bank in its brief, “beginning July 21, TCF faces a revenue loss of $200,000 a day.”
