Minnesota Bank Seeks Court’s Help to Block Swipe Fee Caps

ST. LOUIS -- Lawyers for TCF Financial Corp. are in court today asking a judge to delay any movement on proposed swipe fee caps until a challenge to the law is decided.

TCF Financial, a Minnesota bank and one of the largest debit-card issuers, launched its legal battle against the Federal Reserve in October, as CSNews Online previously reported. The bank is contesting the constitutionality of the rules because they only apply to financial institutions with more than $10 billion in assets, according to the Minneapolis/St. Paul Business Journal.

In April the U.S. District Court in South Dakota rejected TCF's bid to block the new rule; however, its legal team is now arguing its case before the U.S. Court of Appeals in St. Louis.

At the heart of the case is the Fed's proposal to cap fees on debit card transactions at 12 cents, but banks and credit unions with assets less than $10 billion would be exempt from the new rule. The Fed is expected to have a final vote on the proposed cap soon, with an implementation date set for July 21.

TCF, however, contends the exemption gives an advantage to smaller banks. If the new 12-cent rate is implemented, TCF is poised to lose $80 million in the first year, according to the bank. According to its website, TCF has 442 branches in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana, Arizona and South Dakota. It is the 11th largest U.S. Visa Classic debit-card issuer ranked by sales volume.

TCF's case has been winding its way through the legal arena for eight months now, but the Senate's failure to adopt a bill which would have delayed swipe fee reform for at least six months has pushed the bank's suit into the spotlight. The rest of the banking industry now has its collective eyes on the case.