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TCF Loses Debit-Fee Appeal; Fed Sets Final Rules

A TCF Bank spokesman said that the bank is disappointed that it lost its appeal and said that the banking industry will need to make up for lost profits-likely at the cost of consumers.

The Federal Reserve on Wednesday set its final rules that limit "swipe fees" that some banks charge merchants in exchange for being able to accept debit-card payments. Those rules came on the same day that Wayzata-based TCF Financial Corporation lost its appeal over the enforcement of the new rules.

The debit-card swipe fee rules constitute the Durbin amendment-a portion of the Wall Street financial reform act, or the Dodd-Frank Act, that was passed by Congress in July 2010. The new limits only apply to banks that have $10 billion or more in assets.

Under the Fed's final rules, those banks are limited to charging merchants 21 cents per transaction starting October 1-above the 12-cent limit that the Fed originally proposed and about half of the average fee of 44 cents that is currently charged by banks, according to Fed documents.

Ted Brausen-owner of a Shell gas station/convenience store in Arden Hills and Brausen Auto in Roseville-recently flew to Washington, D.C. to join other U.S. small business owners in supporting the new rules. Brausen told Twin Cities Business that he was a bit surprised by the increase from the initial 12-cent limit, but he said that "it's still a big win for all small businesses everywhere."

"I think we did a great job," Brausen said. "It just goes to show that the small guy can win once in a while."

TCF has been fighting the Fed's swipe-fee limits since last October when it sued six members of the Federal Reserve's board, arguing that the new rules would cause it to lose significant revenue and are unconstitutional.

Earlier this year, District Judge Lawrence L. Piersol in Sioux Falls, South Dakota, denied TCF's request for a preliminary injunction to stop the swipe-fee limits from being enforced, concluding that TCF was unlikely to prevail in the case. Shortly after, TCF appealed the decision.

But on Wednesday, an appeals court sided with Judge Piersol and denied TCF's request.

TCF spokesman Jason Korstange told Twin Cities Business on Wednesday morning that the bank is disappointed with the court of appeals' decision and the Fed's final rules. He said that TCF has not decided what it will do next but will look at its options and move forward.

"We feel that price fixing is bad for America," Korstange said. He estimated that TCF stands to lose between $45 million and $50 million annually under the new rules and said that the banking industry will need to make up for that lost money, likely at the cost of consumers.

Minneapolis-based U.S. Bancorp-the only other Minnesota bank that has more than $10 billion in assets and is therefore affected by the new rules-joined TCF Bank earlier this year in voicing opposition to the swipe-fee regulations. A company representative could not be reached for comment on the Fed's final ruling.

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