D.C. District Court Finds Fed Interchange Rules Are Invalid

On July 31, 2013, the U.S. District Court for the District of Columbia (“District Court”) issued a sharply worded Memorandum Opinion in the merchant litigation with the Federal Reserve Board (“Board”) regarding the Board’s Regulation II—NACS, et al. v. Board of Governors of the Federal Reserve System (“Opinion”). United States District Judge Richard Leon held that two critical aspects of Regulation II—the debit interchange fee and network exclusivity provisions—are contrary to the language and purpose of the underlying statute, section 920 of the Electronic Fund Transfer Act, commonly known as the “Durbin Amendment.”

The Durbin Amendment was added to the Dodd-Frank Act on the Senate floor shortly before the Act was enacted in to law. After passage, there were efforts to enact legislation to make the Durbin Amendment less onerous, particularly for smaller banks, but these efforts were unsuccessful.

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