RANCHO-CUCAMONGA, Calif.-Following a federal judge's ruling invalidating the new limits on debit swipe fees, experts remind that adjustments to the interchange rate are not coming soon.
Last week U.S. District Judge Richard Leon struck down the 21-cent debit interchange cap for FIs above $10 billion in assets-which could rise to as high as 24 cents depending on certain circumstances-ordered the ceiling to remain in place until new regulations or interim rules are written.
Sources speculated on several outcomes:
* The Fed does further analysis and releases a lower cap.
* The Fed files a counter suit or appeals the ruling.
* Financial institutions and their trade groups file a counter suit.
"As we know, the Fed moves slowly," said Stan Hollen, president of CO-OP Financial Services. "I would be surprised to see any new rules before the second quarter of next year."
Michael Moebs, economist and CEO at Moebs $ervices, Lake Bluff, Ill., believes the court ruling will likely provoke an appeal to the Supreme Court. "From Circuit and Appeals court rulings it would appear that banks and credit unions would lose going to the Supreme Court if a narrow interpretation is maintained, which the courts have historically done.
"However, the question then comes up: Should banks and credit unions only make money on the transaction business enough to help offset some overhead expense, or should a profit, money earned after all expenses, be allowed?" continued Moebs. "My view is banks and credit unions should bring a separate case against the Dodd-Frank Act Durbin Amendment on the grounds of profit is constitutional and just contributing to overhead is not constitutional."
Options Being Investigated
Eric Richard, general counsel for CUNA, said the trade organization is "investigating our legal options on behalf of credit unions going forward."
Carrie Hunt, general counsel for NAFCU, said, "We are reviewing (the ruling) to determine our next steps."
Stuart Perlitsh, CEO of the $325 million Glendale Area Schools FCU, Glendale, Calif., summed up the frustration many credit union CEOs have expressed since the Durbin rules came into effect and have done little more than line merchants' pockets. "This is another example where the government thinks they are doing something good for the people but they really do not know business or how it works and will not take advice. This is a tragedy. This ruling is not a good thing for credit unions. How long it takes to write new rules is anyone's guess."
