U.S. banking groups join debit fee legal battle
* Banking groups file brief in support of TCF lawsuit
* TCF claims debit fee crackdown is unconstitutional
By Dave Clarke
WASHINGTON, March 11 (Reuters) - National banking groups representing firms of all sizes are getting behind a lawsuit challenging the constitutionality of a crackdown on debit card processing fees.
On Friday the groups announced they had filed a friend-of-the-court brief in support of a lawsuit the banking unit of TCF Financial Corp (TCB.N) filed in October against the Federal Reserve, which is charged with implementing limits on the fees.
Among those joining the Friday filing are the American Bankers Association, the Financial Services Roundtable, the Independent Community Bankers of America, and the National Association of Federal Credit Unions.
Banks and retailers have mounted a massive lobbying campaign over Fed proposals on limiting "interchange" fees, which merchants pay banks and credit-card networks every time a customer buys something with a debit card.
The limits are called for in the Durbin amendment in the Dodd-Frank financial reform law enacted last summer.
The Fed in December proposed capping the fees at about 12 cents per transaction -- a 75 percent cut. The banking industry estimates this would cost them $12 billion annually.
The brief filed by the banking groups argues that the Fed proposal goes too far.
"The Board's erroneous interpretation of the Durbin amendment threatens to wreak havoc on this vital component of our nation's economy and to cause substantial structural disruptions to the financial-services industry," the groups wrote in their brief.
In its lawsuit against the Fed, TCF argued that the fee crackdown required by the law is unconstitutional because it applies only to about 1 percent of U.S. banks -- those with assets of $10 billion or more -- and because it will set a fee that takes into account only a narrow aspect of a service's cost.
The lawsuit was filed in U.S. District Court for the District of South Dakota. It named as defendants a number of top federal officials, including Federal Reserve Chairman Ben Bernanke and Fed Vice Chair Janet Yellen
The Justice Department is seeking to have the case dismissed. TCF filed additional legal briefs in defense of its suit last week.
TCF is seeking a preliminary injunction to postpone the lower fee limit from going into effect. A hearing is scheduled for April 4.
A final Federal Reserve rule implementing a fee cap is due April 21, but Bernanke has said it may take longer.
Banks and card companies are pushing Congress to pass legislation that would at least delay the rule. Senator Richard Durbin, the crackdown's author and the No. 2 Democrat in the Senate, has vowed to fight such efforts.
The case is TCF National Bank v. Bernanke et al, U.S. District Court, District of South Dakota, No. 10-04149. (Reporting by Dave Clarke, Editing by John Wallace)
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