Courts Rule Federal Reserve Debit Card Swipe Fee Regulation Was Too High
The Fed must now rewrite its rule.
Oct 27, 2026 | 2 min read
By Andy Owen
On Monday, a federal appeals court ruled that the Federal Reserve must rewrite its rule setting the regulated rate that banks can charge to process debit card transactions. The court ruling is a positive development for retailers, who have argued that the rate set by the Fed was far higher than what federal law allows.
“This decision confirms what merchants have said for more than a decade: The Fed let the nation’s biggest banks charge far more than the law allows,” said NACS Senior Vice President of Government Relations and General Counsel Doug Kantor. “Two courts have now agreed that the current rate lets banks collect billions of dollars a year more from stores and their customers than the law ever meant for them to have—far more than it takes to cover their costs and earn a healthy profit. Rather than keep defending an illegal rule, the Fed should promptly replace it with one that complies with the law and takes some of the upward pressure off the prices shoppers pay every day.”
The Fed rule, which was implemented in 2011 following passage of 2010’s Dodd-Frank Act, allowed banks with $10 billion or more in assets to charge up to 21 cents per debit card transaction plus one cent for fraud prevention, as well as 0.05% of the transaction amount for fraud and loss protection.
The Dodd-Frank Act states that the regulated rate needs to be both reasonable and proportional to the costs that banks incur. However, the Fed rule illegally allowed the rate to be calculated based on costs that should have never been included.
In 2021, Corner Post Inc., a convenience retailer and truck stop in North Dakota, and retail trade groups sued to block the Fed rule. In Monday’s ruling, the U.S. Court of Appeals for the Eight Circuit said that the rule violated Congress’ intent because of its allowances for fraud protection and other expenses in banks’ swipe fees.
“Today’s ruling is a step forward in a process that should lead to much lower debit card swipe fee rates,” said Kantor. “Lower rates will be good for both retailers and their customers.”
Swipe Fees
