WASHINGTON (8/15/13)--Judge Richard Leon on Wednesday set a tight schedule for the Federal Reserve Board to revise its debit interchange cap rule, asking Fed attorneys to return to his court room within one week with the board's thoughts on issuing an interim final rule.
The judge also asked for an interim final rule implementation timeline.
The Fed attorney said the agency has not yet decided whether it will appeal Leon's recent ruling, and noted there are a range of options for responding to the debit interchange issue. The judge seemed to scold the Fed's counsel for being unprepared to articulate the Fed's substantive positions on whether there should be an interim rule and how long such a rule would take to put in place.
Fed board members can come back from wherever they are on vacation or schedule a conference call, Leon suggested. The Fed needs to move expeditiously, he stressed.
Leon has extended the current stay on the interchange rule for an additional week. The next hearing is officially scheduled for Aug. 21 at 2 p.m. (ET). Briefs on a potential Fed interim interchange rule must be submitted by Aug. 28, and briefs on the issue of potential damages must be submitted by Sept. 16.
Leon on Wednesday also asked whether the court should order issuers to "disgorge revenue" obtained due to the Fed regulation.
Attorney Seth Waxman, speaking on behalf of a coalition of financial institution groups, including the Credit Union National Association, said such "damages" were not requested by the plaintiffs in the case, the financial institutions that would pay the damages are not party to the case and as such have not had the ability to defend themselves, and it is unclear the legal basis for the judge's theory of why damages could even be required. The coalition filed an amicus brief earlier in the case.
CUNA President/CEO Bill Cheney said, "CUNA is alarmed at the possibility any financial institution could be required to pay 'damages' for following the rules established by a federal agency." The CUNA CEO pledged to pursue every legal avenue available to prevent this from occurring. Leon has agreed to accept briefing on this topic before Sept. 16, and CUNA will ensure credit union interests are put before this judge, Cheney said.
Credit unions under $10 billion are exempt from the fee cap rule and would have a strong argument that any such order must not apply to them, CUNA General Counsel Eric Richard emphasized.
"CUNA will continue to follow the progress of debit interchange. It is a serious issue for credit unions and we are exploring a variety of options to ensure credit unions' interests are protected in any changes to the debit interchange regulation," Cheney added.
The U.S. District Court for the District of Columbia hearing follows Leon's July 31 decision to strike down the Fed's price caps on debit interchange fees. He ruled at that time that the Fed did not follow narrow congressional intent when it implemented the cap and other changes imposed by what is known as the Durbin amendment. He also said in that ruling that the Fed would have some time to redraft its rules--but did not specify how much time.