TCF Drops Swipe-Fee Suit After Losing Appeal

Just one day after losing an appeal, TCF Bank said that it was dismissing its suit that it filed last October, which argued that new rules regarding debit-card swipe fees are unconstitutional.

TCF Bank said Thursday that it is moving on and dropping its preliminary injunction lawsuit that it filed last year, which argued that new rules regarding debit-card “swipe fees” are unconstitutional and will cause it to lose millions in revenue.

The bank's decision came just one day after it lost its appeal in the case and followed the announcement of the Federal Reserve's final rules that limit the fees that some banks charge merchants in exchange for being able to accept debit-card payments.

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.

TCF has been fighting the Federal Reserve'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.

“While we continue to believe that the Durbin Amendment is unconstitutional because it requires below-cost pricing and exempts 99 [percent] of all U.S. banks, we believe our lawsuit has served its purpose in demonstrating the unfairness of the Durbin Amendment and that it is time for us to move on,” William A. Cooper, TCF's chairman and CEO, said in a statement. “The Federal Reserve Board's final rule is an improvement from its initial proposal and recognizes many of the points we made in our case.”

TCF spokesman Jason Korstange told Twin Cities Business on Wednesday that the bank stands to lose an estimated $45 million to $50 million annually under the new rules, and he said that the banking industry will need to make up for that lost money, likely at the cost of consumers.

With approximately $12.1 billion in total assets, TCF Financial Corporation-which operates subsidiary TCF National Bank-is Minnesota's second-largest bank holding company. It has 444 branches in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana, Arizona, and South Dakota.