The 8th U.S. Circuit Court of Appeals has invalidated the Federal Reserve’s current cap on debit card swipe fees. A three-judge panel affirmed a previous ruling that the Fed’s implementation of the Durbin Amendment exceeded its legal authority by creating an unauthorized third cost category for financial institutions.
The legal challenge was initiated by Corner Post, a convenience store based in North Dakota. The original 2011 regulation allowed financial institutions with assets exceeding $10 billion to charge 21 cents per transaction, plus 0.05% of the transaction value and an additional cent for fraud prevention.
District Judge Daniel M. Traynor previously determined that the Fed’s rule unlawfully shifted billions of dollars from merchants to issuers. The appellate court has now ordered the Federal Reserve to establish a new fee structure that strictly adheres to statutory boundaries.
The Merchant Payments Coalition welcomed the decision, asserting that the existing rate permitted banks to collect excessive funds beyond their operational costs. Conversely, the Defense Credit Union Council expressed disappointment, noting that credit unions still face significant infrastructure and fraud monitoring expenses.
