ABA and nine other financial services trade groups filed a friend-of-court brief yesterday in the merchant associations' lawsuit charging the Federal Reserve with failure to follow key Dodd-Frank Act requirements when it set the cap on debit card fees.
The lawsuit alleges that the Fed -- under pressure from the banks and credit card industry -- included costs in the debit interchange final rule that the DFA’s Durbin amendment barred.
The trade groups' brief asks the U.S. District Court for the District of Columbia to reject the merchants' suit. The merchants are correct in their assertion that the "final rule is flawed, although for the opposite reasons [they] presented," the letter states.
The Fed’s final rule implementing the Durbin amendment set draconian price caps that won’t cover card issuers’ costs, let alone permit issuers to exercise their statutory and constitutional right to a reasonable rate of return on their investments, the trade groups said.
They added that the merchants claimed that the price controls would benefit consumers, but evidence is lacking that they led to lower retail prices, or that anyone but the merchants themselves have benefited.
Read the friend-of-the-court brief.