The 8th U.S. Circuit Court of Appeals has struck down the Federal Reserve’s longstanding regulation that capped debit card interchange fees at 21 cents per transaction. In a ruling assessing the Federal Reserve Board’s statutory authority under the Dodd-Frank Act’s Durbin Amendment, the appellate court vacated the rate ceiling, holding that regulators failed to follow proper administrative procedures when formulating and maintaining the fee cap. The decision marks a major victory for financial institutions that have contested the restriction for over a decade.
Commercial lenders and banking trade organizations initiated the challenge, contending that the arbitrary 21-cent cap severely restricted banks from recovering necessary processing expenses, anti-fraud investments, and escalating cybersecurity costs. Retail merchant groups, which strongly favored fee restrictions to limit consumer transaction costs, voiced concern that the invalidation would drive payment processing fees higher. The appellate panel directed the central bank to reexamine interchange fee structures in alignment with updated statutory definitions and industry data.
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Sources:
https://www.courthousenews.com/eighth-circuit-strikes-down-federal-reserves-21-cent-debit-card-fee-cap/