TCF’s Cooper Believes Opposition To Fed’s Proposed Interchange Cap Is Growing

The head of TCF Financial Corp., which filed a lawsuit against the Federal Reserve Board in October challenging its proposed debit card interchange rate cuts, said Jan. 20 that growing opposition to the proposal may help his case. The effort is part of a multi-pronged attack from banks on the debit interchange restrictions (see story). 

“Key people in Congress are now saying this is … a bad law, and I think the chances that there will be some form of legislative action associated with this, either delaying it while it is studied or repealing it in its totality, … is more likely than it was in the past,” William Cooper, TCF chairman and chief executive, said during a conference call with analysts discussing the Wayzata, Minn.-based bank’s fourth-quarter results.

“The Congress people who supported this thing, they were looking at helping the guy in … the local gas station. But over 80% of this savings is going to go to 1% of retailers,” Cooper said. “I mean, this is charging Joe Lunchbucket trying to get by in his life to use his card and make Wal-Mart $1 billion more a year. And that is not a popular thing in Congress.”

Though he did not name names, Cooper expects other banks to file supporting briefs, which should help give the lawsuit gravitas, he said. The comment period on the Fed’s proposal ends Feb. 22.

“It is now very likely that others–other banking groups or individual banks–will be joining us … in that suit,” Cooper said.

TCF’s lawsuit claims that the so-called Durbin Amendment to the Dodd-Frank Act is unconstitutional in that it would force some banks to offer debit interchange below cost and unfairly exempt smaller banks from the new rules (see story).

The Fed proposed last month to cap debit interchange fees at 12 cents per transaction. The final rule is due April 21, and if unabated it would go into effect in July (see proposal).

One analyst on the earnings call pointed out that the interchange cap seems to be in line with rates in Europe and Australia.

Cooper shot back: “Well, in Europe and in Australia, they do not have … [our] constitution. We do. Under the laws of those places, they can do this kind of thing. They can pass a law and take your property. In America, they can’t.”

There will be a hearing on the suit, which was filed in federal court in South Dakota, in April. Cooper said he expects an appeal no matter who wins.

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