More billable hours were amassed this month as lawyers and judges weighed words to determine whether banks and credit unions are collecting too much in debit card swipe fees.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included an amendment sponsored by Sen. Richard Durbin (D-Ill.) that instructs the Board of Governors of the Federal Reserve System to draft regulations ensuring that "the amount of any interchange transaction fee ... is reasonable and proportional to the cost incurred by the issuer with respect to the transaction."
Corner Post, a truck stop in North Dakota, sued the Federal Reserve in 2021, saying it overstepped its authority in its interpretation of the law and ended up with a formula that charges too much.
Last August, the U.S. District Court for the District of North Dakota agreed with Corner Post, saying the Federal Reserve exceeded its authority when it included fraud-loss adjustments and other essential costs in its 2011 debit interchange rule.
The ruling would set aside the Fed's swipe fee regulations, but it is being stayed until the issue is resolved by Eighth Circuit Court of Appeals. A three-judge panel heard oral arguments May 13 in St. Paul, Minn.
After the hearing, America's Credit Unions (AmCU) posted on its website that the questioning revolved around whether Congress intended to allow only narrow incremental-cost recovery or whether it delegated broader policymaking authority to the Federal Reserve.
AmCU said the panel of judges pushed back on the Board of Governors' argument that both fixed and variable costs could qualify as "incremental" costs under the Durbin Amendment.
It also said the major disagreement focused on whether interchange fees should reflect true transaction-specific costs.
Corner Post argued that Congress intended interchange fees to compensate issuers for costs directly tied to individual debit transactions, while the Fed Board defended the inclusion of broader operational costs in the fee cap.
AmCU filed an amicus brief in January 2026 in the case, arguing the lower court's decision does not align with the text, structure and purpose of the statute, and would force the Federal Reserve to impose interchange fee caps far below the actual costs incurred by debit card issuers.
Meanwhile, an opposite decision was reached in September 2025 in a similar case brought against the Fed by Linney's Pizza, a Kentucky restaurant.
In that case, U.S. District Judge Gregory F. Van Tatenhove in Frankfort, Ky., dismissed the restaurant's case.
Van Tatenhove waded through language down to the meaning of "the." He decided that the law's instruction to base fees on the costs to "the issuer with respect to the transaction" was a collective "the," and not intended to require the costs of each transaction to each issuer to be calculated at the cash register.
"Linney's Pizza advances a reading of the statue – one in which it requires transaction-specific fees – that is nigh impossible to accomplish," Van Tatenhove wrote. "The fees and associated costs for these transactions are calculated at a later point, with costs shifting based on a variety of factors, effectively making it impossible to calculate transaction-specific fees as Linney's Pizza would wish."
That case is now in appeal to the Sixth Circuit in Cincinnati, where Sen. Durbin filed an amicus brief May 11.
Durbin wrote that the Federal Reserve Board of Governors initially issued a proposed rule that was consistent with the law's text and purpose, "but the Board later altered its proposed rule significantly in response to heavy lobbying by the banking industry.
"The result was a Final Rule that perpetuated the interchange system's inefficient and excessive subsidization of banks' fixed costs and fraud losses through high debit fees that are centrally fixed by the Visa and Mastercard card network companies," he wrote. "The excessive fees and inefficiencies permitted by the Board's Final Rule are ultimately borne by consumers in the form of higher retail prices."
Contact Jim DuPlessis at Jim.DuPlessis@arc-network.com.
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