Appeals court strikes down Fed's 21-cent debit card swipe fee cap as unlawful

A federal appeals court ruled Monday that the Federal Reserve must rework its long-standing cap on what banks can charge merchants to process debit card transactions. The Eighth Circuit Court of Appeals found the Fed's 21-cent limit unlawful ¹.

The fee is called an interchange or swipe fee. Merchants pay it to the bank that issued a customer's card each time the card is used. Congress told the Fed to address soaring swipe fees in a 2010 law known as the Durbin Amendment ¹.

What the court said

Judge David Stras, a Trump appointee, wrote the 11-page ruling. He found the Fed overstepped its authority by folding fixed costs into the fee formula ¹. The law lets the Fed consider only the "incremental cost" a bank incurs for a given transaction ¹.

In passing the Durbin Amendment, Congress could hardly have been clearer,

Stras said the Fed may not count the price of hardware, software, labor and other network costs in any future cap ¹. He also said the Fed need not calculate the exact cost of every transaction and may use economic shortcuts to find an average variable cost ¹.

From Channel GOPTrump calls his own appointed judge disloyalDick Durbin · 1.5K plays · captioned, with the source named

How the case got here

Corner Post, a North Dakota convenience store, sued in 2021. A federal district court in North Dakota sided with the store in 2025, and the Eighth Circuit affirmed that decision ¹. The district judge, Daniel Traynor, had put his order on hold pending appeal. He did so to keep debit transactions from becoming "a completely unregulated market" ³.

Under the 2011 rules, large banks could charge up to 21 cents per transaction. They could add 1 cent for fraud prevention and 0.05% of the purchase for fraud losses ³. The cap applied to banks with more than $10 billion in assets. It did not force banks to charge 21 cents, but that became the standard rate ¹.

The Fed argued in May that its cap cut pre-regulation rates by about half ¹. It declined to comment Monday, and Corner Post's attorneys did not respond to a request for comment ¹.

The money at stake

One industry publication, citing the Nilson Report, said debit swipe fees still cost merchants and customers $38.7 billion in 2024 ³. Sen. Dick Durbin, an Illinois Democrat, told the court in February that the Fed's rule let Visa and Mastercard set debit fees at 22 to 24 cents per transaction. He said banks' incremental costs were 4.1 cents ². That is Durbin's claim, not a court finding.

Congress enacted the Durbin Amendment because American consumers and businesses deserve a debit system that is efficient

What happens next

It is not yet clear how the Fed will rewrite the cap. Corner Post argued in May for tiered limits based on a bank's size, transaction volume and location ¹. In 2023 the Fed proposed lowering the cap to 14.4 cents, but banking groups have fiercely resisted it and it has stalled ¹.

The sources do not say what the ruling means for the earlier stay of the lower-court order. Nor do they say whether the Fed will appeal further.

That matters because swipe fees are a hidden cost in nearly every store purchase. Lower fees could eventually ease costs for merchants, but nothing in the ruling requires stores to pass savings on to shoppers. The cap only bars the Fed from using the old formula.

The Record

1. Jan 1, 2010Congress enacted the Durbin Amendment, requiring debit swipe fees to be "reasonable and proportional" to a bank's incremental cost ¹.
2. Jan 1, 2021Corner Post, a North Dakota convenience store, sued the Fed over the 21-cent cap ¹.
3. Aug 11, 2025A North Dakota federal judge vacated the Fed's debit fee rule but put his order on hold pending appeal ³.
4. Oct 26, 2026The Eighth Circuit affirmed that the 21-cent cap is unlawful and said the Fed must rework it ¹.

Sources

1. Courthouse News, “Eighth Circuit strikes down Federal Reserve's 21-cent debit card fee cap” (2026-10-26). courthousenews.com/eighth-circuit-strikes-down-federal-reser
2. U.S. Senate Judiciary Committee (Democrats), “Durbin files amicus brief in support of the U.S. District Court for the District of North Dakota's ruling in Corner Post v. Board of Governors” (2026-02-23). judiciary.senate.gov/press/dem/releases/durbin-files-amicus-
3. NACS (convenience store trade group), “Judge Rules Debit Swipe Fees Are Set Higher Than Intended” (2025-08-11). convenience.org/Media/Daily/2025/August/11/1-Judge-Rules-Deb

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