TCF Suit Turning Into a Focal Point for Fight over Durbin Amendment

TCF Interchange SuitThe court dispute between TCF National Bank (NYSE: TCB) and the Board of Governors of the Federal Reserve is starting to attract attention from merchants, economists, and other financial services firms. Recently, the court granted eight groups the right to file “friend of the court” briefs in the suit. Such an unusually large number of “amicus briefs” shows how heated the issue is. The TCF suit is turning out to be a focal point for the battle over the Durbin Amendment and its potential impact on debit card interchange.

We’ve covered the TCF suit in several prior articles, including an announcement of TCF’s request for an injunction preventing enforcement of the Durbin Amendment and a discussion of the Federal Reserve’s motion to dismiss TCF’s claims.

Now, parties representing both sides of the debit card interchange issue are joining the court fight by requesting the right to file “amicus curiae” briefs in the suit. An amicus brief is a brief filed by someone who is not a party to the case, but who volunteers to offer information to assist a court in deciding a matter before it. Amicus briefs are often filed by parties who are concerned about the outcome of a case and who want to make sure the court fully understands the issue.

The issue of debit card interchange regulation is a contentious one, with complex implications to consumers, merchants, and financial services companies. The fact that at least 8 groups (or “amici”) are offering to file briefs shows the importance of the TCF court case. The amici include: the Minnesota Bankers Association, the South Dakota Bankers Association, the U.S. PIRG, the Retail Litigation Center, Inc., the Merchants Payment Coalition, the Clearing House Association, the Financial Services Roundtable, the American Banker’s Association, and others. Some groups of associations joined together and will file a single brief.

Listed below are the “amici” who have been authorized by the South Dakota Court to file amicus briefs, as well as a link to each of the requests.

Amicus Group Position
Group of Economists and Economic Scholars The proposed amici curiae seek to submit a brief in support of plaintiff TCF National Bank’s challenge to the “Durbin Amendment,” Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010 (the Dodd-Frank Act), Public Law 11-203. They seek to submit this brief because of the extreme public importance of this case to consumers, the banking system, and innovation in the payment card industry.
State Banking Trade Groups The proposed amici curiae are state banking trade groups, which provide products and services to, and advocacy on behalf of, their member banks. The lead amicus of the group is Joseph J. Witt, President/CEO of the Minnesota Bankers Association. Amici have no financial interest in any party to the case or in the outcome of the case. The proposed amici curiae seek to submit a brief in support of plaintiff TCF National Bank’s challenge to the “Durbin Amendment,” Section 1075 of the Dodd-Frank Wall
Street Reform and Consumer Financial Protection Act of 2010 (the “Dodd-Frank Act”), Public Law 111-203. They seek to submit this brief because of the extreme public importance of this case to consumers, the banking system, and innovation in the payment card industry.
Class of Plaintiffs The Class of Plaintiffs in In Re Payment Card Interchange Fee And Merchant-Discount Antitrust Litigation, No.1 :05-MD-I720 (E.D.N.Y.) (“MDL Class”) respectfully moves this Court for an Order granting leave to file an amicus curiae brief in this case in support of defendants. Comprised of a class of merchants and trade associations, the MDL Class represents millions of merchants that accept Visa and MasterCard debit cards as forms of payment. The MDL Class submits this motion, and subsequent amicus brief, to express its opposition to the positions and factual assertions TCF has presented in this case, and to provide the Court with key information regarding the history and economics of the payment card- and specifically debit
card-industry in the United States. MDL Class counsel is intimately familiar with the development and details of debit card products and payment networks, both domestically and abroad, and the respective effects on competition.
The South Dakota Bankers Association South Dakota banks, like banks everywhere, are able to charge low (or no) fees to their customers for debit cards and/or checking accounts due in large part to the interchange fees they charge retailers. Thus, the Durbin Amendment’s new limits on debit card interchange fees will have a profound effect on the way covered banks charge for their services – and, indeed, on whether they can even recover their costs, let alone generate a fair profit. The Association opposes this kind of treatment for the banking industry. If allowed, the Association’s amicus brief will attempt to highlight for the Court the utterly flawed process that led to the passage of the Durbin Amendment and the harmful consequences that it will visit upon banks and their customers if it is allowed to stand. The Association’s brief will also explain that the so-called “Smaller Bank Exemption” was not sought or desired by the smaller banks exempted from the Durbin Amendment.
U.S. PIRG The proposed amicus curiae, U.S. PIRG, serves as the non-profit, non-partisan Federation of State Public Interest Research Groups, which are public interest advocacy groups with over one-half million members nationwide. Amicus has no financial interest in any party to the case or in the outcome of the case. The proposed amicus curiae seeks to submit a brief in support of defendants’ motion to dismiss plaintiff’s challenge to the “Durbin Amendment,” Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010 (“Dodd-Frank”), Public Law 111-203. Amicus seeks to submit its brief due to the importance of the impact this case will have on consumers and the payment card market.
Retail Litigation Center, Inc. The Retail Litigation Center, incorporated in Virginia, is a public policy organization that identifies and engages in legal proceedings that affect the retail industry. The RLC, whose members include some of the country’s largest retailers, was formed to provide courts witll retail industry perspectives on significant legal issues, and to highlight tlle potential industry-wide consequences of legal principles that may be determined in pending cases. The proposed amicus seek to submit a brief in support of defendants, who oppose TCF’s constitutional challenge to the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203. Specifically, the brief will (1) discuss the history of
the debit card market; (2) oppose TCF’s claim that tlle Durbin Amendment violates the Fifth Amendment’s prollibition on uncompensated takings; and (3) discuss severability of any unconstitutional provisions of the Durbin Amendment. The RLC seeks to submit this brief because of the great public significance that the Durbin Amendment, and this litigation, have for
retailers across the country including member of the RLC, whose customers use debit cards to pay for goods and, services they purchase.
Merchants Payment Coalition In light of the substantial impact of interchange fees on their day-to-day business operations, MPC members have a significant interest in defending the Durbin Amendment’s reasonable regulation of those fees. MPC believes that its amicus curiae brief will substantially assist the Court’s resolution of this case by highlighting the nature of the interchange market, the legislative history of the Durbin Amendment, and the pro-competitive and pro-consumer rationale for the statute. MPC respectfully requests leave of this Court to file an amicus curiae brief.
The Clearing House Association
L.L.C., American Bankers Association, Consumer Bankers Association, Credit Union National
Association, The Financial Services Roundtable, Independent Community Bankers of America,
Midsize Bank Coalition of America, and National Association of Federal Credit Unions
With virtually unprecedented unanimity, amici stand in opposition to the Federal Reserve Board’s imposition of unreasonable and drastic price controls on debit card interchange fees. Over the past several decades, the financial institutions represented by amici have collectively invested billions of dollars to help develop an efficient, convenient, and secure debit card payment system. Today, debit cards have become the primary non-cash payment methodology of choice for millions of Americans and thousands of merchants, who conducted almost 38 billion transactions worth more than $1.45 trillion in 2009 alone. It is undeniable that the innovation of debit card payment has been a tremendous economic boon for all-consumers,
merchants, and the financial-services industry. Amici appear before this Court in support of TCF to explain the detrimental effect the Board’s action would have on the stability of the electronic payment structure that undergirds literally trillions of dollars of our economy, as well as the serious constitutional issues that the Board’s action raises.

Of the eight amici who intend to file briefs, four are in favor of TCF, and four are in favor of the Federal Reserve.

One amicus brief has been filed so far (the other briefs will be filed in the near future) – a comprehensive brief filed by the Merchant Payments Coalition. In their brief, the Coalition’s primary argument is as follows:

TCF argues that the Durbin Amendment violates the Due Process Clause’s purported prohibition against confiscatory government rate-setting because it does not allow TCF to “recover its actual costs of the service at issue, plus a return on capital.” TCF’s due process challenge falls short for a number of reasons. …

TCF’s due process challenge must fail unless the Durbin Amendment’s interchange fee regulation is arbitrary, discriminatory or irrelevant to a policy that the legislature is free to adopt—none of which TCF has established here. The Durbin amendment is rationally related to Congress’s concern for reducing excessive interchange fees set by Visa and MasterCard in an anticompetitive market. The statute is designed to protect merchants from excessive fees and thus to promote competition and, ultimately, consumer welfare. It easily survives due process analysis under the proper standard.

The interest, lobbying, and lawyering around the Durbin Amendment is increasing, and the TCF suit in Federal Court in South Dakota may turn out to be a key battleground… for both sides.

Stay tuned….

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