Diverse Reactions on Interchange Appeal; Judge Requests Briefs on Possible Interim Rule (Aug. 22, 2013)
Aug. 22, 2013
Financial industry groups are applauding yesterday’s announcement by the Federal Reserve Board of Governors that it will appeal a court ruling invalidating the agency’s debit interchange and network routing rules. Though the Fed’s rules setting debit interchange fee limits under the Durbin Amendment are “far from perfect,” the court’s July 31 decision tossing the rules “compounds Durbin’s already negative consequences and is the wrong result for consumers,” said Bill Cheney, president & CEO of the Credit Union National Association (CUNA).
But merchant groups, which sued the Fed over its original rule, were disappointed with the appeal. “We want to see this case resolved today, not next year, so these fees can finally be brought under control,” said J. Craig Shearman, vice president for government affairs public relations, National Retail Federation, one of the plaintiffs in the suit.
The case could land in the D.C. Circuit Court within the next nine months to a year. The Fed and attorneys for the merchant plaintiffs that won the July 31 decision in the case are pushing for an expedited appeal. The merchants’ attorneys said in yesterday’s hearing that the retailers would rather keep a flawed interchange cap in place, rather than no cap at all—which could happen if the appeal case is delayed. U.S. District Court Judge Richard Leon, who issued the July 31 decision, at the time placed an immediate stay on his own ruling, keeping the Fed’s original rules in place while giving the agency time to decide whether or not to appeal. That stay was scheduled to expire on Wednesday, but both parties argued for keeping it in place during yesterday’s hearing, and Judge Leon granted an extension. “The Fed raised the possibility of the merchants having to live for a while in a world with no rule at all. The possibility of returning to a pre-Durbin world, even temporarily, might allow financial institutions to charge whatever they want for interchange fees,” noted CUNA General Counsel Eric Richard.
Although the Fed has the authority to write an interim rule while the appeal process plays out, the agency and the merchant groups contended yesterday that doing so would create undue confusion and compliance complications. Nonetheless, Leon gave both parties until Aug. 28 to prepare briefs on a potential interim rule.