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Next Steps in the Durbin Regulation

By  |  August 9, 2013

On 31st July, 2013 the District of Columbia trial court invalidated the Federal Reserve Board’s Durbin regulation, suspending the swipe fee regulation in a cloud of open-ended questions. In an exclusive interview with PYMNTS.com, Ronald Mann, Albert E. Cinelli Enterprise Prof. of Law, Co-Dir. Charles E. Gerber Program in Transactional Studies at Columbia Law School, elaborates on the next steps in the NACS regulation.

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    KMK: Ron, this invalidation has left the payments community with a number of open-ended questions. How do you see the future proceedings shaping up?

    RM: The district court vacated the existing regulation, but stayed its order, so the current status is that the Board’s regulation remains in force for the time being, despite the court’s conclusion that it is invalid. Essentially, that leaves the Board obligated to produce a new regulation on a schedule with sufficient promptness to satisfy the Court. Whether the new regulation will be preceded by notice and comment will be a decision for the Board, though given the complexity of the issues and the stark changes from the Board’s existing interpretation a renewed comment period seems likely.

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    KMK: There is a lot of speculation around how the Board is likely to react if the course of action the court suggests is unacceptable to the Board. What do you think is likely to happen on appeal?

    RM: So assuming that course of action is unpalatable to the Board, the Board’s appeal would go to the United States Court of Appeals for the District of Columbia Circuit, which sits in Washington in the same building as the District Court. The timing of that appeal is difficult to predict, though it seems most unlikely it would be completed in less than a year. And even then, if the Board lost it well might seek review in the Supreme Court. Even with the shrinking docket, there is always a reasonable chance the Court would review a decision invalidating a regulation of this significance.

    KMK: What will be the key question on this appeal, if the Board presses ahead for one?

    RM: It will be to balance statutory text against deference to agency expertise. It is hard to challenge the view that the statute is poorly drafted, and that the Board was hard-pressed to design a regulation that was both practical and consistent with the statute. The district court’s broad conclusion that the regulation was inconsistent with the statute surely reflects the fact that the litigation here was between the retailers and the Board, with the banks not directly present to explain their side of the matter. It is always difficult to predict how the court of appeals will receive this kind of case, but my sense is that it is quite a difficult one, so that the result on appeal is most uncertain.

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