Judge Richard Leon's opinion overturning the Federal Reserve debit interchange regulations could mean credit unions have to double the number of payment networks represented on their debit cards.

Under the current and now invalidated regulations, debit issuers have to place two unaffiliated payment networks on each debit card. In practice that has usually been a major card brand's network and one other. 

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But in his 58-page opinion released Wednesday, Leon declared that this requirement does not meet what the Durbin Amendment actually requires.

“The (Federal Reserve) Board's interpretation of (the amendment's network exclusivity section) cannot be reconciled with the plain meaning or spirit of the statute because it still allows networks and issuers to make only one network available for many transactions,” the judge wrote.

“Indeed, by the Board's own admission, several common transaction types still cannot be authenticated using the PIN method, leaving signature debit the only available option. … This result cannot be reconciled with Congress's goal of providing all merchants with a choice between multiple unaffiliated networks for every transaction.”

Leon then proceeded to examine and dispute each of the Federal Reserve's three main reasons it said it used to choose the exclusivity provisions, including its citation of the “logistical burden” on the payment system required by adding a total of four unaffiliated payment networks to each card.

“That might  be the case,” the Washington-based jurist wrote of the possible difficulty, “but the law does  not impose those  burdens. In fact, the Durbin Amendment does not specify how the Board should go about achieving the statute's requirement.”

He then cites a comment letter the Federal Reserve received and published during the process leading up to the final rule which suggested the regulator require networks to allow PIN networks to process signature transactions, provided they are willing to accept the risk of chargebacks.

“In other words, the Board could have required networks to allow cross routing of signature and PIN transactions, thereby ensuring that each debit card had multiple unaffiliated dual message network options on which every type of debit transaction could be processed,” Leon wrote, adding, “The Board chose instead to adopt a different approach – one that, unfortunately, is inconsistent with the statute.”