Credit union and banking trade groups are urging a federal appeals court to reject a challenge to the Federal Reserve's debit interchange rule, warning that a ruling in favor of merchants could undermine payment security, reduce financial services and create uncertainty across the U.S. payments system.
The Defense Credit Union Council (DCUC), America's Credit Unions and five other financial industry organizations filed an amicus brief with the U.S. Court of Appeals for the Sixth Circuit in Linney's Pizza v. Federal Reserve, a case challenging the Federal Reserve's implementation of the Durbin Amendment.
The lawsuit, brought by a Kentucky-based pizza chain and supported by merchant groups, argues that the Fed improperly included certain issuer costs when establishing debit interchange fee caps under Regulation II. A federal district court rejected those claims in 2025, and the coalition is urging the appeals court to uphold that decision.
The groups argue that the Federal Reserve's interpretation has been settled law for more than a decade and was previously upheld by the U.S. Court of Appeals for the D.C. Circuit in 2014. They contend that interchange fees help financial institutions cover the costs of authorizing, clearing, settling and securing debit card transactions while supporting investments in fraud prevention, cybersecurity and payment innovation.
According to the brief, a lower interchange cap could force some institutions to process transactions at a loss and reduce resources available for consumer banking services. The coalition also disputes claims that interchange fees generate excessive profits, noting that Federal Reserve data show only 77% of issuers currently recover their allowable base costs under Regulation II.
"The stakes extend far beyond interchange policy," said DCUC Chief Advocacy Officer Jason Stverak. "At issue is the ability of credit unions to continue providing secure payment services, investing in emerging threats and technologies, and delivering value to the members and communities they serve."
America's Credit Unions noted the case is closely related to other ongoing interchange litigation, including Corner Post v. Federal Reserve, which could also affect the future of debit card fee regulation. The organizations warned that overturning Regulation II would create significant disruption for financial institutions, merchants and consumers that have relied on the current framework since 2011.
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