The Fed governors are challenging each of TCF’s arguments, arguing that TCF had failed to identify “any statute, regulation or contract establishing that it is legitimately entitled” to its current level of debit-card interchange fees. The Fed argued that TCF could not claim a loss of private property, because the bank does not actually have a “protected property interest” in its debit-card income. Rather, these fees are determined by Visa and factors beyond TCF’s control. TCF, the Fed argued, “has not shown that its contract with Visa entitles it to debit interchange fees at the current level.”
By contrast, an injunction to stop the new fee limits would harm retailers and consumers who “currently bear much of the cost of interchange fees,” the Fed argued. The Fed Board of Governors estimates that revenue from debit and prepaid card interchange fees totaled $16.2 billion in 2009.
The Fed goes on to defend the exemption from interchange fee regulation of FIs under $10bn in assets, as a means of ensuring that these issuers continue to offer debit cards to their accountholders. We find that to be an interesting point, since the Fed elected to interpret the amendment’s language as allowing that exemption, but nothing more. The lack of definition around that specific component of the Durbin Amendment has become a lightning rod for anti-Durbin activists who have grasped onto the justifiable fears of the small FI community, who see the wolf at their door.
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