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Surprising Turn at Debit Interchange Hearing: Federal Reserve and Merchants Join Forces

By Mercator Advisory Group
August 21, 2013
in Analysts Coverage
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In what turned out to be a surprising turn of events at the hearing on Judge Leon’s ruling against the Federal Reserve’s debit interchange and routing rules, merchants agreed with the Fed to ask an appeals court to stay the judgment pending an appeal.

The reason behind this odd alliance? If the ruling stays in place and no interim rule is established, then debit interchange fees can revert to pre-Durbin levels.

From Electran:

The merchants explained to the court that they would rather continue to pay 21 cents per debit transaction for the next year or so while the appeal is pending, rather than pay what they called the unregulated market rate, which they claimed was upwards of 50 cents per transaction before the Durbin Amendment was implemented.

According to Electran’s eyewitness report, the judge did not agree and gave both parties another week to file briefs defending their position. Meantime, the appeal will be filed along with a request to stay the ruling while the appeal is in process which could take up to a year. No mention has been made as of yet as to how this turn of events would impact debit routing, but assuming that the ruling stays in place with no interim rule modifications, then does it mean that issuers can once again control debit routing? We’ll update this as more information becomes available.

Click here to read more from Electran.

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