WASHINGTON (3/24/14)--Calling it "truly a victory for credit unions and a rebuke to the merchants," the Credit Union National Association welcomed a federal appeals court ruling Friday that upheld the Federal Reserve's debit interchange regulation.
A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit unanimously reversed an earlier decision of U.S. District Judge Richard Leon, issued in July, that the Fed interchange rules violated the plain text of the Durbin Amendment to the Dodd-Frank Act.
By superseding Leon's opinion, this newest ruling removes the chaos and confusion caused when Leon vacated the Fed rule and then issued a stay so the rule remained in place until the appeals process was completed.
In this case known as NACS, et al. v. Board of Governors of the Federal Reserve System, a merchants' coalition challenged the Fed's implementation of a Dodd-Frank Act-imposed debit interchange cap as too high. CUNA and its partner members of The Clearing House coalition maintain that the cap, in fact, is too restrictive.
"The district court granted summary judgment to the merchants, concluding that the rules violate the statute's plain language. We disagree," the three circuit court judges penned in their opinion.
"Applying traditional tools of statutory interpretation, we hold that the (Federal Reserve) Board's rules generally rest on reasonable constructions of the statute, though we remand one minor issue--the Board's treatment of so-called transactions-monitoring costs--to the Board for further explanation," they continued.
CUNA General Counsel Eric Richard explained of the judges' opinion, "This decision constitutes an almost total rejection of the merchants' arguments.
"We hope this will be a first step toward restoring some grounding in reality to the debate over interchange fees, not only in the courts, but also in Congress and at the regulatory agencies."
On Friday, the National Retail Federation said it is disappointed in the decision, and said it is weighing an appeal to the U.S. Supreme Court.
At this point, the merchants have a few options. First, they could do nothing, almost certainly ending the case. Or they could ask the D.C. Circuit to review the case "en banc," which would ask all members of that court to decide whether they want to re-hear the case. Or they could appeal to the Supreme Court.
CUNA will continue to monitor the case, and should a Supreme Court review move forward, will alert credit unions.