A federal appeals court today struck down the Federal Reserve’s 15-year-old regulation setting debit card interchange fees, called Regulation II. The Eighth U.S. Circuit Court of Appeals ruled that the Fed exceeded its authority in determining the costs banks could include when calculating the fees.
The ruling upholds a lower court’s August 2025 decision that eliminated the Fed’s debit card interchange fee structure. In last year’s decision, U.S. District Court Judge Daniel Traynor found that the Dodd-Frank Act’s Durbin Amendment “clearly prohibits” the consideration of any costs except for incremental authorization, clearance or settlement costs in setting fees.
The decision stems from a lawsuit brought by a group of retailers and Corner Post, a North Dakota convenience store and truck stop, that challenged the Fed’s implementation of the Durbin Amendment to the 2010 Dodd-Frank Act. As part of Reg II, which was adopted in 2011, financial institutions with more than $10 billion in assets can collect 21 cents per debit transaction, plus 0.05% of the transaction amount and an additional cent for fraud prevention.
According to the court’s ruling on Monday, the Fed must rewrite the rule, capping how much banks can charge for processing debit card transactions. The court said the Fed’s rule violated Congress’ intent by allowing banks to include certain charges, such as expenses for fraud prevention, in debit card swipe fee calculations.
In a statement, the American Bankers Association, along with five other financial trade associations, said the ruling was disappointing.
“The Durbin Amendment’s government price controls have harmed consumers from the start by making it harder for banks to offer affordable banking services and valuable benefits,” the groups wrote. “Today’s decision threatens to compound that harm by preventing regulated interchange fees from reflecting the real costs banks incur to process transactions, prevent fraud and protect customer data.
The associations pointed out that for more than 10 years, corporate megastores have “pocketed billions from the Durbin Amendment while ignoring promises to lower prices for consumers,” and that the decision leaves large retailers paying less for the payment system they rely on every day, while “leaving banks, credit unions and consumers to shoulder the costs.”
The issue, however, is not finished with this ruling, the associations said.
“Another federal appellate court is considering similar questions in the Linney’s Pizza case, where the district court upheld the Federal Reserve’s rule,” they said. “We will continue advocating for an approach that protects consumers and preserves the safe and efficient debit card system they depend on.”
