WASHINGTON (1/17/14, UPDATED: 9:30 A.M. ET)--Oral arguments have just begun as the Credit Union National Association and financial services partners, the Federal Reserve, and merchants today present their views before U.S. Court of Appeals for the District of Columbia Circuit Judges David Tatel, Harry Edwards and Stephen Williams.
The merchant group is speaking first, and will have 25 minutes to make their presentation. The CUNA coalition will speak for 10 minutes, and the Fed representatives will speak for 15 minutes.
CUNA's partners are the American Bankers Association, Clearinghouse Association, Consumer Bankers Association, Electronic Payments Coalition, Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, National Association of Federal Credit Unions, and National Bankers Association. The case is known as NACS, et al. v. Board of Governors of the Federal Reserve System.
Merchants brought the case against the Fed in 2012, alleging that the Fed made errors in implementing a Dodd-Frank-imposed debit interchange fee cap. The Fed's final rule caps debit interchange fees for issuers with assets of $10 billion or more at 21 cents. The regulation also allows card issuers to charge an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may also be charged by financial institutions that are in compliance with the Fed's fraud-prevention standards.
Judge Richard Leon of the U.S. District Court for the District of Columbia in July moved to strike down the Fed's interchange fee caps, but later issued a stay to keep the Fed rules in place during the court proceedings.
CUNA and the coalition in the past have argued that the Fed cap is too low and does not allow debit card issuers to cover their costs and a reasonable rate of return on their investments. The coalition has underscored that consumers have not seen any pricing benefits for products and services promised by the merchants when they were fighting for a government-set cap on what card issuers may charge for their services.
Watch News Now for more on this morning's arguments.