By John Kruzel
WASHINGTON (Reuters) – The U.S. Supreme Court on Monday revived a North Dakota convenience store’s challenge to a Federal Reserve regulation on debit card “swipe fees,” in a ruling that could make it easier for companies to try to undo longstanding federal rules.
The 6-3 decision reversed a lower court’s dismissal of a 2021 lawsuit filed by the 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 comply with the six-year statute of limitations that generally applies to such disputes.
The ruling was delivered on the last day of the Supreme Court’s term which began in October.
Switching fees, also called interchange fees, reimburse banks for the costs of offering debit cards. Fees are determined by Visa, MasterCard and other card networks, with a cap of 21 cents per transaction set by the Fed.
The issue in this case was whether Corner Post was too late in filing its legal challenge. The store argued that it should not be subject to the six-year statute of limitations to challenge the 2011 settlement because it opened in 2018, after that statute 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 store argued that the six-year time limit should not start running until a business is affected – which for Corner Post would be March 2018, when it accepted its first debit card payment.
President Joe Biden’s administration, representing the Federal Reserve Board of Governors, had argued that adopting Corner Post’s legal position would “significantly 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 urging the Supreme Court to uphold a strict statute of limitations that begins the moment a settlement 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 2010 Dodd-Frank Wall Street reform law that directed the Fed to cap sweep 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 cap sued after the Fed set it at 21 cents per transaction. In 2015, the Supreme Court left in place a lower court ruling supporting the regulation.
In its 2021 lawsuit, Corner Post argued that the rule defied Congressional intent and was “arbitrary and capricious” under a federal law called the Administrative Procedure Act.
In 2022, U.S. District Judge Daniel Traynor dismissed the complaint. The St. Louis-based 8th U.S. Circuit Court of Appeals upheld Traynor’s ruling, paving the way for an appeal to the Supreme Court.
The Fed last year proposed reducing the current cap to 14.4 cents per transaction.
(Reporting by John Kruzel, editing by Will Dunham)
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