Bank Sues Bernanke, Fed Over Limits On Fees

SIOUX FALLS, S.D. — TCF National Bank sued Federal Reserve chairman Ben Bernanke and the Fed's board of governors on Tuesday, saying regulations limiting the fees a bank can charge retailers for debit card transactions are unconstitutional.

Minnesota-based TCF National, a subsidiary of TCF Financial Corp., filed the lawsuit in U.S. District Court in South Dakota. The bank said an amendment to Congress' recent financial regulatory overhaul directs the Fed to adopt debit fee regulations based only on the processing costs of authorizing, clearing and settling transactions.

William A. Cooper, TCF Financial's chairman and chief executive, said those costs amount to a fraction of the total amount of money required to manage the debit card system, and the law makes no more sense than regulating the price of a fast-food hamburger based solely on the costs of the meat and the bun.

"It is unprecedented for Congress, or any regulatory agency, to mandate a fee charged in the free market that not only denies a reasonable rate of return on investment, but actually requires the rate to be lower than the incremental cost of providing the service," Cooper said in a statement.

A Federal Reserve spokeswoman didn't immediately return a call seeking comment on the lawsuit.

Last year, $1.21 trillion in purchases were paid with debit cards processed through the Visa and MasterCard networks, generating $19.7 billion in fees paid by merchants, according to data from The Nilson Report, a trade publication. Most of the fees went to banks that issue debit cards.

Merchants maintain that the fee charged for debit cards, also called an interchange fee, is too high. Banks and Visa and MasterCard say the fee takes into account the cost of setting up and maintaining a secure and sophisticated debit payment system.

Cooper said the Durbin Amendment to the Wall Street Reform and Consumer Financial Protection Act of 2010 affects 1 percent of the nation's banks, giving thousands of unaffected banks an unfair advantage.

Comments

[nobodysgirl]

05:54 PM on 10/15/2010

But it IS constitutional to bilk customers dry, is that it?

Too bad for you, TCF bank. You've had free reign for so long you can't remember what fair financial practices are.

No one's crying the blues for you or any of your banks. Suck it up.

[RomeoMD25]

04:36 PM on 10/15/2010

The Federal Reserve needs to open it's books to public scrutiny, as has been ordered by Federal Court, and we need to revoke their power to print money with no assets to back them up. Everytime banks start lending money they don't have, it ends poorly for the American taxpayer.

[smolensk-lies]

04:27 AM on 10/15/2010

ben is giving a speech today in Boston.

Schwarzzenegger says eggs are free speech, and eggs are free speech

sissies need not apply

[diddleydee]

01:54 AM on 10/15/2010

If we only had TARP II and QE3 everything would be ok

[Chris 54321]

12:43 PM on 10/14/2010

....charge for the privilege of using credit - as much as the public can stand - BUT, make the charges clear, so that the consumer is made fully aware of the costs and when they occur prior to taking on a credit card..

[Chris 54321]

12:34 PM on 10/14/2010

...so if Obama seeks to protect the consumer by stopping predatory lending practices - and banks are pushing back - does that mean Obama is wrong - I suppose if you are a CorporateRethug it does.

[Erica]

10:20 AM on 10/14/2010

TCF... quit handing out debit cards if it's "too expensive."

[landskroon]

09:20 AM on 10/14/2010

If and when Banks say the Government is acting against the Constitution, Government should change the Constitution. By the way, when Government would have done all it could, permitted or forced by the same Constitution we would not have had a Global Financial Catastrophy. Failing to act by the way was under GW Bush, protest against action is, again, action against Obama Government. I hope Obama Government will succeed in limiting andpunishing individual bankers.

[diddleydee]

12:10 AM on 10/14/2010

Who can say QE3?

[pankaj kr]

03:57 PM on 10/13/2010

hi

[kanester]

12:14 PM on 10/13/2010

Mr. "TCF Financial's chairman" is using a false, non-equivalent analogy. The:
*processing costs of authorizing, clearing and settling transactions*
does not equal the:
*costs of the meat and the bun*
It does equal the:
*costs of the meat and the bun (and the labor and the overhead)*
What the [greedy] banker is objecting to is the Fed clamping down on banks instituting WINDFALL PROFIT FEES on doing the jobs they're already being paid to do by consumers.
Greedy, greedy bankers (credit union professionals excluded.)

[american-dolt]

10:33 AM on 10/13/2010

END THE FEDERAL RESERVE BANK BEFORE IT IS TOO LATE!

[maidenofdforest]

09:58 AM on 10/13/2010

This is what I understand of this as layman. When you use your credit card, you are asking for a loan from the credit company to use it with their sanctions. When you go over your limit, the interest rates change, plus you are slapped a fine over and above. Merchants pay a fee per transaction, depends on what type they have with the bank. Both instances, banks make money all the time.

With a debit card, there's always money in it to allow purchaser to transact. Dividend rates is lower than that of savings. When depositor exceed withdrawals above your balance, you pay a fine and or over the limit charges. In that note, the bank already makes money. On the side of merchants, this is what the Federal Reserve limits and regulates and bone of contention in the lawsuit. How much banks should charge business operators ----or none at all, according to Federal Reserve.

If banks allow user to transact in debit cards, it then expects to use the same rule as with credit charges to merchants. They do not want to lose the opportunity to make money in any angle. Pissed off probably when Federal Reserve curtailed this chance.

[OC4Obama4Pres]

11:03 AM on 10/13/2010

You don't write like a lay person and I think you explained things very well. I have no sympathy for the banks or their stockholders. None at all. They gouged everyone for years and now that trough is closed.

[maidenofdforest]

11:20 AM on 10/13/2010

I share your sentiments on the banks, comrade. It isn't surprising Wells Fargo is paving the way to reinstate to their depositors re the over the limit fees they slapped at overcharging for the debit card users because they failed to inform their very own clients.

I also not only chide banks for their hastiness in foreclosing homes, adding more insult to injury with homeowners and complicating things with real estate in this country.

And to think we have bailed out these banks during the height of their bank crisis.

PS:I employ logic Math but not really that expert....I run into trouble--or they get into trouble with me if I ask a lot of questions. I'm thinking of buying a good safe & stashing cash if I get tired of bank woes. Seriously.

[BBackSoon]

02:52 PM on 10/13/2010

I love the logic that those Computer Systems to deal with all of those transactions are expensive and need to be paid for. But in earlier times, the banks had to employ armies of data entry people to clear checks.

The banks will cry poor no matter what they do. If they could run a branch with 1 person and the main bank with 3, the bank would still cry about High Administrative Costs.

[maidenofdforest]

04:49 PM on 10/13/2010

You are actually right. Look at this statement. "Banks and Visa and MasterCard say the fee takes into account the cost of setting up and maintaining a secure and sophisticated debit payment system."

When we go deposit our money into the bank system, the corporate establishments have already put in place the nitty gritties of operation down to the lats deposit slips needed. When I as a merchant want to go, use their channel to process my purchaser's cards (debit/credit), they have that sophisticated comptroller out there to do automatic systems in their database. But I need to pay for that extra service to keep the cards proofchecked so another service fee or, if they warrant, an interchange fee. It's akin to fees e.g. late payment charges, overdrafts, whichever way the bank client wishes to go in four corners of the bank, there's a ready charge.

So when you say "The banks will cry poor no matter what they do. If they could run a branch with 1 person and the main bank with 3, the bank would still cry about High Administrative Costs."--you are dead right on. It isn't difficult to find that logic in the sophisticated words to hide charges.

Fairly good reason for the Federal Reserve to put those regulations and laws because precisely, even Wall Street, which has been unregulated went haywire, unchecked for the moneychangers to get us into this mess. And they were supposed to be be Wizards of numbers.

[Kiffanik]

09:27 AM on 10/13/2010

Again, another case of we don't think it went far enough, they think it's gone too far. If banks had to post transactions in order of completion instead of highest to lowest this might not need as much regulation.

[stape45]

09:23 AM on 10/13/2010

"If you have another dollar, we have another fee."