Court Refuses to Enjoin Impact of Financial Reform Legislation

On April 4, the U.S. District Court for the District of South Dakota denied TCF National Bank’s motion to preliminarily enjoin enforcement of the Durbin amendment to the Dodd-Frank financial reform legislation, which would limit large banks’ ability to charge debit fees to merchants. The court held that since no regulations have been promulgated pursuant to the Durbin amendment, a preliminary injunction would be premature.

TCF National Bank has $18 billion in total assets and issues debit cards but not credit cards. In October 2010, the bank filed a complaint alleging that the legislation violates its constitutional right to equal protection for two main reasons:

  1. it only applies to banks with over $10 billion in assets (which is true of roughly 1% of all banks); and
  2. it imposes the most harm on debit card issuers who do not also issue credit cards, since those issuers cannot compensate for the impact of the amendment by assessing credit card fees.

The suit has drawn amicus briefs supporting both sides. For instance, a group of economists and scholars have filed a brief supporting TCF’s position, arguing that the legislation is not only a violation of the constitution, but that it is likely to harm consumers and competition, and hurt the banking system’s stability. On the other side, the Merchants Payments Coalition (“MPC”), a trade association of merchants, argued that the legislation will curb large banks’ ability to impose these fees, which RLC claims are often hidden and have escalated dramatically over time.

In the same hearing, the court said that it will take the defendants’ pending motion to dismiss the case under advisement.