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In August 2025, a federal judge in North Dakota ruled that the Federal Reserve's long-standing cap on debit card "swipe" fees was illegal.
The ruling in Corner Post, Inc. v. Bd. of Governors of the Fed. Rsrv. Sys. found that the Federal Reserve exceeded its authority under the Durbin Amendment by setting the fee cap higher than intended by Congress.
Key Details of the August 2025 Ruling:
The Decision: U.S. District Judge Daniel Traynor vacated "Regulation II," the 2011 rule that capped debit interchange fees for large banks.
The Rationale: The court found the Fed unlawfully included costs for fraud prevention and fixed expenses, rather than limiting fees strictly to the incremental costs of processing transactions, as required by the Durbin Amendment.
Status of the Cap: The ruling was stayed (placed on hold) pending an appeal by the Federal Reserve to the 8th U.S. Circuit Court of Appeals. This means the 21-cent cap remains in place for now to avoid an immediate, chaotic, unregulated market.
Impact on Pending Rules: This ruling does not stop the Federal Reserve from moving forward with a separate 2023 proposal to lower the base debit fee from 21 cents to 14.4 cents.
Background and Future Outlook:
The lawsuit was filed in 2021 by Corner Post, a North Dakota truck stop, arguing that banks were reaping a "windfall" of billions in fees that exceeded, in some cases, the actual costs of processing.
If the ruling stands after appeals, it could significantly alter how debit card fees are calculated, potentially leading to lower costs for merchants. The American Bankers Association (ABA) and other groups have urged the appellate court to reverse the decision, arguing it could destabilize the payment system.
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