Food retail and merchant groups are applauding a decision by the U.S. Court of Appeals for the Eighth Circuit, which upheld a lower court ruling that the Federal Reserve’s 2011 regulated rate for debit card swipe fees was set higher than Congress intended. The Oct. 26 decision in Corner Post Inc. v. Board of Governors of the Federal Reserve System orders the Fed “to come up with a fee structure that reflects the statute Congress wrote.”
“Today’s decision is an important victory for grocery customers and food retailers in our long fight against unreasonably high debit card swipe fees,” said Leslie G. Sarasin, president and CEO of FMI – The Food Industry Association, which filed an amicus brief in the case. “The debit swipe fee cap that the Federal Reserve set in 2011 has been long overdue for reform. Since then, the Fed’s own data has shown that banks’ costs to process debit card transactions have gone down dramatically, yet the rate charged to food retailers and all other merchants has not changed in the 15 years since the law went into effect.”
The case
A three-judge panel upheld a ruling issued last year by U.S. District Judge Daniel Traynor in favor of Corner Post, a North Dakota truck stop and convenience store that sued in 2021, arguing the Fed set the rate too high. Traynor vacated the rate and told the agency to recalculate it, but placed the move on hold pending appeal.
Under the 2011 regulations implementing the Durbin Amendment, banks with at least $10 billion in assets that follow rates set centrally by Visa and Mastercard may charge up to 21 cents per debit transaction, plus 1 cent for fraud prevention and 0.05 percent of the transaction amount for fraud loss recovery. The law required the rate be “reasonable” and “proportional” to banks’ incremental costs, but the Fed also considered fixed costs, fraud losses, transaction monitoring and network processing fees.
“Ignoring what it was supposed to consider and considering what it was supposed to ignore would place the agency on the wrong side,” Circuit Judge David Stras wrote.
Merchants urge quick rewrite
“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,” said Doug Kantor, Merchants Payments Coalition executive committee member and National Association of Convenience Stores general counsel. “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.”
A Fed proposal released in 2023, not yet finalized, would lower the base amount to 14.4 cents; MPC has said it doesn’t go far enough, noting banks’ average cost of processing a debit transaction has fallen nearly 50 percent, from 7.7 cents before the rate was set to 3.9 cents as of 2021.
Debit swipe fees averaged about 45 cents per transaction before the cap, and merchants have saved an estimated $9 billion a year under it, with studies showing 70 percent of the savings shared with consumers. Even so, debit swipe fees cost merchants and their customers $40.5 billion in 2025, according to The Nilson Report, and credit and debit swipe fees together totaled a record $198.25 billion, up 80 percent since the pandemic. The fees are most merchants’ highest operating cost after labor.
Banking groups push back
Six banking and payments trade groups, including the American Bankers Association, America’s Credit Unions, the Independent Community Bankers of America and the Electronic Payments Coalition, issued a joint statement expressing deep disappointment in the ruling.
“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 said. “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. For more than a decade, corporate megastores have pocketed billions from the Durbin Amendment while ignoring promises to lower prices for consumers.”
The groups noted the decision is not the last word: another federal appeals court is considering similar questions in the Linney’s Pizza case, where the district court upheld the Federal Reserve’s rule. Conflicting appellate rulings could ultimately send the question to the Supreme Court, meaning the rate merchants pay at the register is unlikely to change in the near term.
“We applaud the ruling and urge the Federal Reserve Board of Governors to move quickly to establish a new debit regulated rate that reflects Congress’s intent, along with a process for regular updates going forward,” Sarasin said.
Related: NGA Criticizes Preliminary Approval Of $38B Swipe Fee Settlement