ST. LOUIS (CN) – A district court’s decision to deny an injunction against part of the Dodd-Frank Wall Street Reform Act of 2010 was correct, the 8th Circuit ruled.
TCF National Bank sought to enjoin the portion of the Act, also known as the Durbin Amendment, which limited the rate some financial institutions, could charge for processing debit card transactions. TCF claimed the limits were unconstitutional because it will require rates below the cost of providing debit card services and the Act arbitrarily exempts smaller issuers from the rate regulations, which violated TCF’s due process and equal protection rights protected by the Fifth Amendment.
A district court ruled against TCF, finding that the bank was unlikely to succeed on the merits of the case. A three-judge panel of the 8th Circuit Court of Appeals affirmed the district’s ruling.
“Setting aside the confiscatory-rate analysis, we conclude that the challenged provisions of the Durbin Amendment survive rational basis review for the reasons stated by the district court, namely that ‘Congress’s decision to link interchange fees to issuing banks’ actual costs bears a reasonable relationship to two proper legislative purposes: (1) to ensure that such fees are reasonable and (2) to prevent retailers and consumers from having to bear a disproportionate amount of costs of the debit card system,'” Judge Michael J. Melloy wrote.
“Accordingly, based upon the current state of the record (which may change in the future), we do not believe that TCF is likely to prevail on its due-process claim,” Melloy said.