From the Archives: September 2013

Regulatory Roundup 

As summer comes to a close, credit unions are in full swing in support of the Don’t Tax My Credit Union campaign. Accompanying the risk to the credit union federal tax exemption is the recent news of the U.S. District Court for the District of Columbia, overturning the Federal Reserve Board’s rule on debit interchange fees, upholding merchant’s claims that the Board’s rule failed to carry out federal statutory requirements on debit card interchange transaction fees and network exclusivity prohibitions.

The court temporarily ruled to stay its decision until supplemental briefings are provided to effect the stay of vacatur including: “(1) the appropriate length of stay; and (2) whether current standards should remain in place until they are replaced by valid regulations or the board should develop interim standards sufficient to allow the court to lift the stay.”

Due to the potential risk to the credit union federal tax exemption, credit unions are already facing potential turmoil. The effect of this decision from the court may result in even lower interchange revenue for credit unions and the requirement to provide two routing alternatives for both PIN and signature based transactions.

On Aug. 21, the Federal Reserve appealed the court’s interchange decision. An expedited appeal was filed and court was asked to stay its ruling pending the outcome of the appeal, as opposed to having an interim rule be put into place or having no rule at all. The merchants also agreed with a decision to stay the ruling and an expedited appeal, saying that without a rule in place banks and card companies could charge retailers as much as they wanted for accepting debit cards while the appeal process is under way. Both the Federal Reserve and the merchant plaintiffs had until Aug. 28 to present their arguments to continue the stay.

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