How the Supreme Court Has Set up an Intense Struggle Over Sellers’ Debit Card Costs

Decisions from the U.S. Supreme Court are supposed to settle matters, but a verdict the high court delivered early Monday has the potential to stir up debit card pricing questions for some time to come, some observers say.

The justices, in a 6-3 decision, ruled a case brought by a truck stop in North Dakota that challenged debit card acceptance fees can go forward, countering banks’ arguments that the statute of limitations had long since run out on the matter. The merchant, Corner Post, opened in 2018, seven years after debit card interchange limits were set by the Federal Reserve in response to the Durbin Amendment to the Dodd-Frank Act. But the court ruled the clock runs from the time a merchant begins taking debit.

Now, some experts are wondering how many more such challenges are likely. “My gut tells me there will be other guys doing the same thing,” says Steve Mott, proprietor of BetterBuyDesign, a financial-service consultancy. “The banks and the merchants are natural enemies.”

Some observers who agree that the Corner Post case will unleash a flood of suits see the matter as a challenge not so much to debit card pricing as to what they view as a high-handed federal bureaucracy. The Supreme Court’s decision, indeed, “could open the floodgates to additional suits,” notes Eric Grover, proprietor of the payments consultancy Intrepid Ventures, in an email message. Such actions, he argues, “may help check our increasingly absolutist administrative state.”

Grover, who on principle opposes government price controls, has argued for years that the Fed’s debit-pricing limits were too high when viewed against the language of the Durbin Amendment, which applies to financial institutions with $10 billion or more in assets. “While I think that the Durbin Amendment is a bad and harmful law, it is the law,” he says. “The Fed took a very charitable … I would argue lawless … view of what debit issuer costs could be recovered by interchange.”  

Other observers, though, caution that merchants angered by their debit card costs are likely to take a wait-and-see attitude now that the Corner Post matter is settled. “I think they’ll let the suit play out. A lot has already happened,” notes Doug Kantor, general counsel for the National Association of Convenience Stores.

In October, the Fed set out a proposal to reduce its debit-interchange caps. It suggested a 31% reduction in the main component of its interchange ceiling for large issuers, touching on a longstanding sore point among merchants. That proposal would cut the cap to 14.4 cents per transaction from 21 cents.

Merchant groups argue the Fed’s proposed cut doesn’t go far enough, while the banking lobby deplores the proposal as arbitrary and likely to hurt banks and consumers.