Appeals court upholds ruling that voids the Fed’s 21-cent debit card fee cap

A federal appeals court on Oct. 26, 2026, affirmed a district court judgment that vacates the Federal Reserve’s cap on the fees banks collect when a customer pays with a debit card. The U.S. Court of Appeals for the Eighth Circuit sent the matter back for the agency to set a fee structure that follows the statute.¹

Judge David Stras wrote the opinion in Corner Post, Inc. v. Board of Governors of the Federal Reserve System, No. 25-3000, for a panel that also included Judges Lavenski R. Smith and Duane Benton.¹²

The rule and the lawsuit

Regulation II, issued in 2011 under the Durbin Amendment to the Dodd-Frank Act, caps the interchange fee a cardholder’s bank may charge at 21 cents per transaction plus 0.05 percent of the transaction’s value for fraud losses, with one more cent for banks that meet fraud-prevention standards, according to the opinion.¹

Corner Post, a truck stop and convenience store in North Dakota, sued under the Administrative Procedure Act. The Supreme Court ruled in 2024 that the challenge was filed in time. On remand, the U.S. District Court for the District of North Dakota granted summary judgment to the store and ordered the cap vacated, staying that order pending appeal.¹

The panel’s reasoning

The law tells the Fed to consider a bank’s “incremental cost” of authorizing, clearing and settling “a particular electronic debit transaction” and not to consider other costs that are not specific to a particular transaction. The panel read “incremental cost” as marginal cost, meaning the added cost of one more transaction, and read the excluded category as fixed costs.¹

The panel said the Fed never defined incremental cost and counted some fixed costs, and that the law calls for “standards,” plural, not one cap for every bank. It said the Fed may use a proxy such as average variable cost if it bears a reasonable relationship to marginal cost, but must at least separate transaction-specific costs from the rest.¹

The Fed’s position

According to the opinion, the Fed’s 2011 rule read the statute as ambiguous and counted fixed costs common to all debit transactions; on appeal, it asked the court to defer to its reading. The panel declined, citing the Supreme Court’s 2024 Loper Bright decision and the statute.¹ The Fed declined to comment to Courthouse News, and Corner Post’s lawyers did not respond to the outlet.³ As of Oct. 26, the Fed’s press release feed carried no statement on the ruling.⁴

Reaction

Ann Petros, a vice president of America’s Credit Unions, which filed a brief backing the Fed, called the ruling “deeply disappointing” and said vacating the Fed’s framework “ignores the real operational and fraud prevention costs.”⁵¹ Leslie G. Sarasin, president and CEO of FMI, The Food Industry Association, which filed a brief backing Corner Post, urged the Fed “to move quickly” on a new rate, according to Mass Market Retailers.⁶¹

What happens next

The opinion says the decision takes effect only when the court issues its mandate, seven days after the deadline for a rehearing petition or an order denying one. Parties in cases involving federal agencies have 45 days to seek rehearing.¹

In November 2023 the Fed proposed lowering the cap to 14.4 cents plus 0.04 percent of the transaction’s value, with a possible 1.3-cent fraud-prevention adjustment.⁷ The opinion says that proposal has not been adopted. A Federal Register search found no final rule.¹⁸

What the records do not show

• Whether the Fed or the banking groups will seek rehearing or Supreme Court review.¹
• What fee, if any, will apply between the mandate and a new rule; the opinion does not address it.¹
• This report relies on the opinion copy posted by Courthouse News, which bears the court’s caption and filing date; the court’s opinions page could not be searched.¹
• The Fed’s Regulation II information page, last updated May 17, 2024, does not mention the litigation.⁹