On October 26th, the U.S. Court of Appeals for the Eighth Circuit affirmed a lower court’s ruling which found that the existing framework used by the Federal Reserve to set debit card interchange fees is invalid, and it directed the Federal Reserve to develop a new fee structure. While various merchant groups celebrated the ruling as a significant victory, this issue is unlikely to be resolved quickly as another case addressing the validity of the fee structure is still pending before a different court, the U.S. Court of Appeals for the Sixth Circuit.
Background
When the Durbin Amendment of the Dodd-Frank Act went into effect in 2011, it gave the Federal Reserve the power to regulate debit card interchange fees. Under Regulation II (Debit Card Interchange Fees and Routing), the Federal Reserve capped debit card interchange at 21 cents plus 0.05% of the value of the transaction, and it allowed for an additional one-cent fraud-prevention adjustment fee. The fee cap only applies to debit card issuers with more than $10 billion in assets.
In 2025, there were contradictory rulings by two federal district courts in two different cases brought by merchants challenging the validity of the framework the Federal Reserve uses to set debit card interchange fees. The first ruling was in the Corner Post, Inc. vs Board of Governors of the Federal Reserve System case. In its August 2025 ruling, the U.S. District Court for the District of North Dakota found that the Regulation II debit card interchange fee framework is invalid because it exceeds the Federal Reserve's authority under the Durbin Amendment and improperly includes costs unrelated to specific transactions, such as the fraud prevention adjustment. Additionally, it found that adopting a standard fee is not consistent with the Amendment because it states that interchange charged on a debit transaction must be reasonable and proportional to the cost incurred by the bank that issued the debit card. The second ruling came a few weeks later in the Linney’s Pizza, LLC vs Board of Governors of the Federal Reserve System case. In its September 2025 ruling, the US District Court for the Eastern District of Kentucky reached the opposite conclusion and upheld the debit card interchange fee framework. The two rulings were appealed to the U.S. Eighth Circuit Court of Appeals, and the U.S. Sixth Circuit Court of Appeals, respectively.
Current Status of Appeals
On October 22nd, only four days before the Eighth Circuit Court ruled in Corner Post’s favor, finding the fee framework to be invalid, the Sixth Circuit Court of Appeals heard oral arguments in an appeal of the lower court ruling in the Linney’s Pizza case; that lower court ruling upheld the validity of the debit card interchange fee framework. Amicus briefs have been filed by a variety of parties, including various groups representing merchants, banks, and credit unions. It is not known when the Sixth Circuit will issue its ruling.
Verisave’s Take
While merchant groups celebrated the Eighth Circuit Court ruling, this litigation is far from over. If the Sixth Circuit Court upholds the lower court ruling in the Linney’s Pizza case, we will once again find ourselves with two contradictory rulings, and in that event, it is pretty much guaranteed that one or more of the parties involved will petition the Supreme Court of the United States to hear these cases. Even if the Sixth Circuit does not uphold the lower court ruling in the Linney’s Pizza case and instead, like the Eighth Circuit, determines the Federal Reserve’s debit card interchange fee framework to be invalid, the Fed may petition SCOTUS to hear the cases. Keep an eye out for the Sixth Circuit’s ruling; this is definitely a case to watch.
Litigation will continue because the stakes are huge. On one hand, merchants are hoping invalidation of the framework will lead to significantly lower debit interchange rates. On the other hand, banks, credit unions, and other payment industry groups support the current fee framework as they are concerned that a new framework might make it impossible for issuers to recover what they consider to be legitimate processing costs. Even if the framework is ultimately determined to be invalid, we are likely in for a protracted battle over the new framework that will take its place. At the end of the day, this dispute is just one front in a war being waged by merchants, issuers, and the card networks over card processing fees. Other fronts where battles have been raging in recent years include various class action suits filed against Visa, Mastercard, American Express, and Discover alleging anticompetitive behavior, the Illinois Interchange Fee Prohibition Act, and the Credit Card Competition Act. One thing is certain – the war is far from over.
