The U.S. Supreme Court on Monday revived a North Dakota convenience store’s challenge to a Federal Reserve regulation on debit card fees, in a ruling that could make it easier for companies to try to overturn long-standing federal rules.
The 6-3 decision reversed a lower court’s dismissal of a 2021 lawsuit filed by Watford City-based Corner Post challenging a 2011 rule governing how much businesses pay banks when customers use debit cards to make purchases. The dismissal was based on the store’s failure to meet the six-year statute of limitations that typically applies to such disputes.
The ruling was delivered on the last day of the Supreme Court’s session that began in October.
Debit fees, also called interchange fees, reimburse banks for the costs of offering debit cards. These fees are determined by Visa, MasterCard and other card networks, with a cap of 21 cents per transaction set by the Fed rule.
The question in this case is whether Corner Post filed its lawsuit too late. The store argued that it should not be bound by the six-year statute of limitations for challenging the 2011 settlement because it opened in 2018, after that deadline had expired.
Corner Post, backed by a variety of conservative and business interest groups including billionaire Charles Koch’s network and the U.S. Chamber of Commerce, has argued that companies should have broad latitude to challenge regulations they consider illegal and burdensome.
The outlet argued that the six-year time limit should not begin to run until a business has been negatively impacted – which Corner Post said would be March 2018, when it agreed your first debit card payment.
The administration of President Joe Biden, representing the Federal Reserve Board of Governors, had argued that adopting Corner Post’s legal position would “dramatically expand the class of potential challengers” to government regulations and threaten to “increase the burden on agencies and courts.”
A group of small business associations filed a brief asking the Supreme Court to maintain a strict statute of limitations that begins the moment a regulation is finalized. They said allowing lawsuits beyond that deadline “would create chaos, uncertainty, and inconsistent regulatory regimes for the nation’s regulated industries and for the American people the regulations seek to serve.”
Before Congress passed the Dodd-Frank Wall Street Reform Act of 2010, which called on the Fed to cap transaction fees, retailers were paying as much as 44 cents per transaction, making it difficult for small businesses to accept debit cards.
Retailers who expected a much lower cap sued after the Fed set it at 21 cents per transaction. In 2015, the Supreme Court left in place a lower court ruling that had supported the regulation.
In its 2021 lawsuit, Corner Post argued that the rule went against Congress’s intent and was “arbitrary and capricious” under a federal law called the Administrative Procedure Act. (Administrative Procedure Act).
In 2022, United States District Judge Daniel Traynor dismissed the lawsuit. The 8th St. Louis Circuit Court of Appeals affirmed Judge Traynor’s decision, allowing the Supreme Court to take up the case.
Last year, the Fed proposed reducing the current cap to 14.4 cents per transaction.
