Federal government sued over debit card fees - KWWL - Eastern Iowa Breaking News, Weather, Closings

Federal government sued over debit card fees


SIOUX FALLS, S.D. (AP) -- TCF National Bank sued Federal Reserve chairman Ben Bernanke and the Fed's board of governors on Tuesday, saying regulations limiting the fees a bank can charge retailers for debit card transactions are unconstitutional.

Minnesota-based TCF National, a subsidiary of TCF Financial Corp., filed the lawsuit in U.S. District Court in South Dakota.  The bank said an amendment to Congress' recent financial regulatory overhaul directs the Fed to adopt debit fee regulations based only on the processing costs of authorizing, clearing and settling transactions.

William A. Cooper, TCF Financial's chairman and chief executive, said those costs amount to a fraction of the total amount of money required to manage the debit card system, and the law makes no more sense than regulating the price of a fast-food hamburger based solely on the costs of the meat and the bun.

"It is unprecedented for Congress, or any regulatory agency, to mandate a fee charged in the free market that not only denies a reasonable rate of return on investment, but actually requires the rate to be lower than the incremental cost of providing the service," Cooper said in a statement.

Last year, $1.21 trillion in purchases were paid with debit cards processed through the Visa and MasterCard networks, generating $19.7 billion in fees paid by merchants, according to data from The Nilson Report, a trade publication.  Most of the fees went to banks that issue debit cards.

Merchants maintain that the fee charged for debit cards, also called an interchange fee, is too high.  Banks, along with Visa and MasterCard, say the fee takes into account the cost of setting up and maintaining a secure and sophisticated debit payment system.


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