by. Henry Meier
A couple of weeks ago, when a Judge ruled that the Federal Reserve Board misinterpreted the Durbin Amendment to the detriment of merchants, I thought things were pretty bad. After yesterday, things are worse than that. Based on what I am able to glean together from several articles and press releases, here are the latest twists and turns in the litigation.
At the hearing yesterday, Judge Leon raised the spectre of merchants having to be reimbursed for the money they would have pocketed had the Durbin Amendment been implemented properly in the first place. I’m presuming, of course, that the merchants would use any windfall to make products cheaper for the patrons who were nice enough to sign those clever petitions urging swipe fee reform in the first place. But I am not holding my breath. We won’t know what the new debit interchange fee is for several months. But considering that the Fed first considered a $0.12 fee cap, think of how expensive it could get to, for example, pay back merchants the $0.09 difference between that cap and the $0.21 cap ultimately imposed. Remember that the cap just applies to credit unions with $10 billion or more in assets, so there’s no need to break into a cold sweat, at least not yet.
We are looking at new debit card requirements being imposed within a few months. It appears that the Judge may seek to impose interim final rules that would take effect as early as October. What isn’t clear to me is whether this timeline would apply to the expansion of processing fee options. Specifically, if the Judge’s ruling remains intact, credit unions will have to ensure that merchants have two signature-based options and two PIN-based options for processing payments. This isn’t the type of mandate that smaller institutions should be given a little more than a month with which to comply.continue reading »