Fed’s Debit Cap ‘Discriminatory,” Argues TCF Bank

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ST. LOUIS – The Federal Reserve’s proposed cap on debit fees is “discriminatory,” because it singles out the nation’s biggest banks and credit unions, so should be barred from being finalized, lawyers for Minnesota’s TCF Bank told a federal appeals court yesterday.

Timothy Kelly, a lawyer for TCF National Bank, told the St. Louis-based court today it should reverse a trial judge’s decision to deny the bank’s bid for an order blocking the rate, scheduled to take effect July 21, while the bank challenges its legality.

Under the Fed’s proposal, as directed by Congress, banks and credit unions over $10 billion in assets would be strictly limited to what they could charge for debit fees, but all other banks and credits unions would be exempt from the limits.

“Below-cost rates and widespread exemptions are not traditional rate regulation,” Kelly told the three judge panel yesterday.

TCF, ostensibly Twin Cities Financial, filed suit last year seeking to invalidate the measure, arguing it violates the U.S. Constitution’s promises that the government will not confiscate private property without just compensation and of equal protection under the law. The suit is the last chance for banks and credit unions to stop final implementation of the debit fees cap because Congress rejected a bid last week to delay the rule until further study.

However, lawyers for the Fed argued the federal government has “unlimited discretion” to regulate the U.S. banking industry.

TCF says the Fed’s proposed rule will cut its $100 million a year in debit fees to as little as $20 million.

Absent a ruling from the appeals court the Fed is expected to approve a final rule any day.


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