District Court Judge Strikes Down Federal Reserve Board’s Interchange Rule

August 5, 2013

by: Bryan Cave

Decision Favoring Merchants Could Potentially Cost Banks Billions

A U.S. District Court judge recently granted summary judgment against the Board of Governors of the Federal Reserve System (the “Federal Reserve” or “Board”), ruling that the Federal Reserve disregarded Congress’s statutory intent by “inappropriately inflating all debit card transaction fees” and considering data it was not permitted to use in setting a 21-cent cap on debit-card transaction fees under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). In NACS v. Board of Governors of the Federal Reserve System, 11-cv-02075, U.S. District Court, District of Columbia (Washington), Judge Richard J. Leon also ruled in favor of the retailers’ challenge to the network non-exclusivity and routing provisions, stating that the Board’s rule is inconsistent with the “clear, defined language in the network non-exclusivity and routing provisions” and does not support competition or choice in the marketplace.

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