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TCF Financial


CEO William Cooper does not plan on backing down after a federal judge refused a preliminary injunction to stop the Durbin Amendment-- a law that will limit the fees charged to retailers on debit-card transactions--from being enforced.

Instead, Cooper plans to file for an appeal in the next few weeks.

TCF Financial CEO William Cooper

TCF Financial has been at the forefront of the debates on the Durbin Amendment, after it brought the lawsuit against the

Federal Reserve

. Even though TCF didn't get the injunction, the federal judge denied the government's motion to dismiss TCF's complaint.


Maria Woehr spoke with TCF's CEO William Cooper about the hearing and the bank's next steps.


What did you think of the judge's decision?

William Cooper

: We would much preferred they had issued a preliminary injunction and we could have gone from there. We never thought there was a high chance of that. Now we will appeal that ruling to the Eighth Circuit Court of Appeals.

What made it more ambiguous is the judge said that he would like to have another hearing after the Federal Reserve issues its rule. He also said he had serious reservations about where banks under $10 billion were excluded from the rule. The judge wanted to know what would happen if the courts don't rule on the exclusion what would happen to the law.

You can't exclude some banks and include others. He implied the rule would violate the equal protection


The swipe fee cap is supposed to start July 21, but the Federal Reserve Board has not yet decided on the cap amount. The Fed moved the April 21 deadline to set fee standards at 12 cents-per-transaction. What are your thoughts on the delay on setting the fee?


: You have this bill that is coming down that that will be effective in July, and it

will cost somewhere between $13 and $15 billion a year from the banking industry. That is how big a deal it is.

The bill was passed all this time ago and the Federal Reserve basically decides to sit it out. What it demonstrates, I believe, is that the Federal Reserve, the Office of the Comptroller of the Currency and the

Federal Deposit Insurance Corp.

and everybody else from a banking regulatory perspective has looked at this thing and said, 'Wait a minute. This is a bad idea. We should study this some more.'



What would be a better idea for interchange fees? Could a compromise be stricken?


: The merchants don't all pay the same fee. The big merchants like


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already pay half the fee that a smaller merchant does because of the power of negotiation. There already is a market out there that allows them to pay a smaller fee than a smaller merchant.


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are in the middle here and Visa is a for-profit publically owned company.

Visa and MasterCard make a profit based on the little fee that it collects for each transaction that occurs on a debit card or a credit card. It is in their interest that the volume be the highest, because that is how they make the most money. They set that fee, and the way they set it is finding the maximum number of merchants that will accept it because it is in their economic interest to do it. The maximum number of banks will offer it to their customers in the form of a card. So the system already devises a market rate.

The merchants would not take this product if they did not make money off of it. The merchant gets a 20 percent lift, on average, from accepting these transactions. In other words, if you have a merchant that doesn't take Visa -- and another that does -- the merchant that does is going to get about 20 percent more sales because people are more apt to have the ability to buy things if they don't have the cash in their pocket or a check book and the merchant doesn't take any check losses.

Once we have authorized that transaction we are on the hook for it. So the merchant can move these transactions through a lot faster. They get an economic benefit. The economic benefit is greater than the cost, or they wouldn't do it and the bank gets an economic benefit through the fee we collect.

So we encourage customers to use the debit card because we make a profit too. Indeed, debit card transactions have quadrupled in volume. But there is a market price set. We don't need the government fiddling around saying what a fair price is here. It's like them saying to


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what a fair price for a MacDonald's hamburger should be. It's like them saying you can charge for the bun but not the hamburger.



Does the Durbin Amendment "hurt" consumers or protect them in your opinion?


: It hurts the consumers in a number of ways. If you think that Target is going to pass this back to consumers. Why the heck would they be lobbying, and when they talk about it on their earning calls they are already talking about increased profits from the Durbin amendment. They are going to make more money. Who is going to pay for this? That customer that gets that card for free.



Why did TCF pursue this lawsuit?


: We have had 65 quarters of profitability. We never made a single subprime loan. We never booked a derivative. We never did anything off balance sheet. We never did any securitization. We never did anything that got banks in all the trouble.

This thing came down through the political process through Durbin as one business group taking advantage of the unpopularity of another, and using its lobbying power to get a benefit. 85% of this revenue, this $13 billion to $15 billion will go to one and a half percent of the merchants. In other words, Wal-Mart is going to make a billion dollars more a year on this thing.

It is patently unfair to us, businesses and to my customers, many of which will be shut out of the banking business because if this happens they simply won't be able to afford it, especially the lower income people. So we look at it as being wrong. When you look at the law it is unconstitutional.

--Written by Maria Woehr in New York.

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