The National Retail Federation hailed a federal court ruling overturning the Federal Reserve’s 2011 debit card swipe fee cap, calling it a long-overdue correction to rules that allowed big banks to charge excessive fees to merchants.
U.S. District Judge Daniel Traynor ruled Wednesday that the Fed’s cap exceeded limits set by the Durbin Amendment, a 2010 law designed to ensure debit transaction fees remain “reasonable” and “proportional” to bank costs.
Retailers Claim Win After 14-Year Battle
“For 14 years, merchants have argued the Fed’s attempt to let big banks collect rent-seeking fees for debit transactions was illegal,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said. “This court was correct in requiring the Fed to base rates on individual transactions, not a blended average.”
Martz said the decision, if upheld on appeal, could save merchants hundreds of millions of dollars.
Case Originated With North Dakota Merchants
The lawsuit was filed in 2021 by Corner Post, a truck stop and convenience store in Watford City, N.D., with support from the North Dakota Retail Association and the North Dakota Petroleum Marketers Association.
While NRF was not a party to the case, Martz served as co-counsel. The U.S. Supreme Court allowed the case to proceed last year despite the Fed’s claim that a six-year statute of limitations applied.
The Durbin Amendment instructed the Fed to cap debit card swipe fees based only on banks’ incremental costs. Initial proposals suggested a 7-to-12-cent cap per transaction. But after input from banks, the Fed added fixed costs, fraud losses, monitoring, and network processing fees to the calculation.
The final 2011 rule capped fees for banks with at least $10 billion in assets at 21 cents plus 1 cent for fraud prevention and 0.05% of the transaction for fraud loss recovery.
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Bank Costs Have Dropped, Cap Hasn’t Kept Pace
Fed surveys show banks’ allowable costs averaged 7.7 cents per transaction in 2009, making the cap less than three times the cost. By 2021, costs fell to 3.9 cents, but the cap stood at more than five times actual expenses.
In 2023, the Fed proposed lowering the cap to 14.4 cents, cutting fraud loss recovery to 0.04%, and raising fraud prevention to 1.3 cents.
The National Retail Federation countered that the base rate should be 10.5 cents and that fraud prevention charges should be eliminated because EMV chip adoption in 2015 shifted liability to merchants.
Economic Stakes for Merchants and Consumers
Before the Durbin Amendment, banks charged about 45 cents for a typical debit transaction. Regulation has since saved merchants an estimated $9.4 billion annually, with studies showing about 70% of those savings passed on to consumers.
In 2024, debit swipe fees totaled $38.7 billion, while overall debit and credit card swipe fees more than doubled over the past decade, reaching a record $187.2 billion.
Martz said the ruling sends a clear message: the Fed must comply with the law’s intent and ensure debit card swipe fee rates reflect actual transaction costs.
“Nutritious food might unite us,” she said, “but fair fees keep the marketplace healthy for both merchants and consumers.”