Justices Review Timeliness of 2021 Swipe Fee Lawsuit

The court has granted a petition that seeks to revive a 2021 lawsuit filed over debit interchange fees.

October 02, 2023

The U.S. Supreme Court said that it will hear a retailer’s appeal over the timeliness of its lawsuit contesting a Federal Reserve regulation on debit card swipe fees, according to Law360.com.

The Supreme Court stated in an order list that it had granted a petition filed by Corner Post Inc., a North Dakota convenience store, that seeks to revive a 2021 lawsuit over the Fed’s Regulation II, which is a 2011 rule that capped interchange fees that banks charge merchants to process debit card transactions.

Last year the Eighth Circuit concluded that the time to claim under the Administrative Procedure Act (APA) begins running from the date of rule publication and not the date of alleged injury, and therefore the court decided that Corner Post and the North Dakota groups filing the lawsuit in 2021 had filed too late, dismissing the suit.

Corner Post’s petition states that because it sued within three years of opening and first being injured by Regulation II, it met the Administrative Procedure Act’s six-year statute of limitations.

By granting the petition, the Supreme Court will decide which interpretation of the APA is correct. If it rules in favor of Corner Post, that would be significant both because it could lead to lower debit card fees, and because it would open additional opportunities for challenging a large number of federal regulations in the future.

The original 2021 lawsuit was filed by the North Dakota Retail Association and the North Dakota Petroleum Marketers Association, as well as merchants including Corner Post.

The complaint regarded the Durbin Amendment to the Dodd-Frank financial regulation, which ordered the Fed to regulate debit fees at a number reasonable and proportional to the cost banks incur handling the transactions. The Fed picked 21 cents per transaction for the fees, but data has shown that the bank cost for processing debit-card payments declined to 3.6 cents per transaction in 2017.

The plaintiffs alleged that the Fed’s regulation was excessive and at odds with the Durbin Agreement.

 “For a decade, the board has failed to properly follow Congress’s instructions to ensure that debit-card processing fees are reasonable and proportional to the costs of debit-card transactions,” the complaint alleged. “American consumers and merchants continue to suffer the same harms that prompted Congress to act in the first place. Enough is enough.”

While Regulation II had been around for a decade, Corner Post claims that its time limit to sue did not begin until it opened its doors and began having to pay the allegedly inflated debit interchange fees.

"Given petitioner's view that interchange fees should be more stringently limited, the appropriate course is to petition the board for a regulatory amendment reducing the cap on permissible interchange fees and to seek judicial review if the board declines," the Fed told the justices.

The Supreme Court agreed to hear the case during its new term which begins October 2nd. That means there should be a decision in the case by next summer at the latest.

NACS Daily recently reported on the NACS Convenience Corner blog, What’s Going On With Credit Card Swipe Fees? Learn more about swipe fees and other NACS resources at convenience.org.