The Supreme Court’s ruling on swipe fees could open U.S. regulation to more lawsuits

Author: John Kruzel

WASHINGTON (Reuters) – The U.S. Supreme Court on Monday reopened a North Dakota convenience store case, challenging a Federal Reserve regulation on debit card swipe fees. The ruling could make it easier for companies to try to repeal long-standing federal regulations.

The 6-3 decision overturned a lower court’s decision to dismiss a 2021 lawsuit filed by Watford City-based Corner Post challenging a 2011 rule that governs how much businesses pay banks when customers use debit cards to make purchases. The dismissal was based on the store’s failure to comply with the six-year statute of limitations that typically applies to such disputes.

The ruling came on the last day of the Supreme Court’s term, which began in October.

Swipe fees, also known as interchange fees, reimburse banks for the cost of offering debit cards. The fees are set by Visa, MasterCard and other card networks, with a maximum cap of 21 cents per transaction set in accordance with Fed rules.

This case was about whether the Corner Post was late in filing its legal challenge. The store argued that it should not be bound by the six-year statute of limitations to challenge the 2011 ordinance because it began operating in 2018, after that deadline had passed.

Corner Post, backed by a variety of conservative and corporate interest groups including billionaire Charles Koch’s network and the U.S. Chamber of Commerce, argued that businesses should have broad leeway to challenge regulations they see as unlawful and burdensome.

The store argued that the six-year deadline should not begin to run until the business was adversely affected – in Corner Post’s case, that would be March 2018, when the store accepted its first debit card payment.

President Joe Biden’s administration, representing the Federal Reserve Board of Governors, argued that adopting the Corner Post legal position would “significantly expand the class of potential opponents” of government regulation and threatens to “increase burdens on agencies and courts.”

A group of small business associations filed a letter calling on the Supreme Court to uphold a strict statute of limitations that begins when the regulations are finalized. They said allowing lawsuits after that deadline “would create chaos, uncertainty, and inconsistent regulatory regimes for the nation’s regulated industries and for the American people these regulations are intended to serve.”

Before Congress passed the 2010 Dodd-Frank Wall Street reform act, which directed the Fed to cap swipe fees, retailers paid as much as 44 cents per transaction, making it difficult for small businesses to accept debit cards.

Retailers who expected a much lower limit sued after the Fed set it at 21 cents per transaction. The Supreme Court in 2015 left in place a lower court ruling supporting the regulation.

Corner Post argued in its 2021 lawsuit that the provision goes against Congress’s intent and is “arbitrary and capricious” under a federal law called the Administrative Procedure Act.

U.S. District Judge Daniel Traynor dismissed the lawsuit in 2022. The 8th U.S. Circuit Court of Appeals, based in St. Louis upheld Traynor’s decision, setting up a Supreme Court appeal.

Last year, the Fed proposed lowering the current limit to 14.4 cents per transaction.

(Reporting by John Kruzel; Editing by Will Dunham)