TCF Finacial Corp., recently sued the Federal Reserve in an effort to block new legislation that restricts fees charged to retailers on debit and credit card transactions.
The lawsuit, which was filed in a federal court in Sioux Falls, South Dakota, offers one of the first challenges to President Barack Obama’s recent fiscal reform.
TCF said the legislation, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is unconstitutional and puts larger U.S. banks at a competitive disadvantage, forcing them to offer debit card services below cost. They argue this gives the competitive edge to smaller banks, which are exempt from the recent legislation.
TCF Chief Executive Officer William Cooper told Bloomberg he believes the law is similar to Congress telling Burger King, “Ignore all the costs on the cooks and advertising and the interest expense, you can only charge for the hamburger and the bun.”
The lawsuit stems from a settlement by Visa and Mastercard with federal regulations, last week. The settlement will allow merchants to pass on savings to customers paying with cash or debit thereby avoiding credit card interchange fees. Last year the income generated on these fees was almost $20 billion.