Appeals Court Rejects Effort to Stop Debit Fee Rule

Posted on June 30, 2011 by Lee Istrail

Earlier this week, the Eighth Circuit Court of Appeals affirmed a federal trial court decision denying TCF National Bank’s motion to preliminarily enjoin enforcement of the Durbin amendment to the Dodd-Frank financial reform legislation. As reported in an earlier post, in April a federal district court in South Dakota rebuffed TCF’s attempt to halt the implementation of the rule, which would limit large banks’ ability to charge debit fees to merchants. In its opinion, the Eighth Circuit expressed the view that TCF is ultimately unlikely to prevail in the suit, and that the Durbin Amendment, which distinguishes between large and small issuers of debit cards, bears a rational relationship to the government’s interest in protecting small financial institutions.

TCF continues its fight in the federal district court proceeding, and today the court will hold a scheduling conference to determine the applicable timetable.

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Senate Declines to Delay Cap on Debit Fees

Posted on June 10, 2011 by Lee Istrail

On June 8, the Senate fell six votes short of the 60 votes needed to postpone for one year the implementation of a ceiling on the debit fees which banks charge to merchants. The Durbin amendment to the Dodd-Frank financial reform legislation would cap these fees, and Senator Durbin notes that a final rule is expected to be unveiled within a matter of days. Merchants have encouraged passage of the rule, which could cut the average 44 cent fee down to the Fed’s proposed level of 12 cents.

As reported in an earlier post, the Durbin amendment has drawn an ongoing challenge in federal district court in South Dakota alleging that it violates small banks’ constitutional right to equal protection. Now that the Senate has declined to slow down the rollout of the rule, the federal court challenge is likely to become a higher-stakes battle accompanied by greater attention from industry participants.

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President Obama Considers Former Banker to Head Up New Consumer Bureau

Posted on June 9, 2011 by Kelley Drye

In a change of course, President Obama is considering Raj Date, rather than the current chief architect Elizabeth Warren, to head the newly-formed and soon to be empowered Consumer Financial Protection Bureau (CFPB). Mr. Date has over 10 years of experience as a banker and as a consultant to financial institutions. Since February he has been the CFPB’s Associate Director for Research, Markets & Regulations, heading up the agency’s efforts to develop a regulatory plan for products including credit cards and home mortgages. Mr. Date’s extensive industry experience could make him a more plausible candidate for the post than Ms. Warren, whose candidacy has been adamantly opposed by Senate Republicans.

However, many opponents are likely to remain. As discussed in a prior post, Republicans have led an effort to change the structure of the CFPB. In addition, 44 Republican Senators have vowed to oppose the nomination of any director so long as the structure of the CFPB remains intact. Even for a nominee who has walked in the shoes of banks for years, it would likely be a contentious fight along partisan lines.

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