The United States District Court has invalidated the Fed’s Interchange Rules in NACS et al v Board of Governors of the Federal Reserve Board. The reasons are almost too numerous to mention, with the court at one point calling the Fed’s rules “utterly indefensible.”
The court winds up by noting “First, the interchange transaction fee and network non-exclusivity regulations are fundamentally deficient. It appears that the Board completely misunderstood the Durbin Amendment’s statutory directive and interpreted the law in ways that were clearly foreclosed by Congress.”
One interesting point is what happens next. The court stated it would stay vacatur, to provide the Fed an opportunity to replace the invalid portions of the final rule. In so doing, the court believes it can prevent the Fed from adopting similar regulations while at the same time avoid the disruption of vacating the entire regime. To properly effect the stay of vacatur, two issues remain:
- the appropriate length of the stay; and
- whether current standards should remain in place until they are replaced by valid regulations or the Fed should develop interim standards sufficient to allow the court to lift the stay.
Because the parties failed to address the proper remedy in their motions, the court invited supplemental briefing on these issues, stating it was inclined toward a stay of vacatur “for months, not years.”