Supreme Court ‘swipe fees’ ruling may open US regulations to more suits

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 businesses to try to undo longstanding federal rules.

The 6-3 decision reversed a lower court’s dismissal of the 2021 lawsuit by the Corner Post, located in Watford City, challenging the 2011 rule governing the amount businesses pay banks when customers use debit cards to make purchases. The dismissal had been based on the store missing a six-year statue of limitations that generally applies to such litigation.

The ruling came on the final day of the Supreme Court’s term that began in October.

Swipe fees, also called interchange fees, reimburse banks for costs involved in offering debit cards. The fees are determined by Visa, MasterCard and other card networks, with a cap of 21 cents per transaction set under the Fed rule.

At issue in the case was whether Corner Post was too late when it brought its legal challenge. The store argued that it should not be bound by the six-year statute of limitations to challenge the 2011 regulation because it opened for business in 2018, after that deadline had passed.

Corner Post, backed by various conservative and corporate interest groups including billionaire Charles Koch’s network and the U.S. Chamber of Commerce, contended that businesses should have wide latitude to challenge regulations they consider unlawful and burdensome.

The store argued that the six-year time limit should not start running until a business is adversely 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 substantially expand the class of potential challengers” to government regulations and threatens to “increase the burdens on agencies and courts.”

A group of small business associations had filed a brief urging the Supreme Court to maintain a strict statute of limitations that begins at the time a regulation is finalized. They said that allowing lawsuits beyond this deadline “would create chaos, uncertainty and inconsistent regulatory regimes for the nation’s regulated industries and the American people the regulations seek to serve.”

Before congressional passage of the 2010 Dodd-Frank Wall Street reform law that directed the Fed to cap swipe fees, retailers paid as much as 44 cents per transaction, which had made it hard for small businesses to accept debit cards.

Retailers that expected a much lower cap sued after the Fed set it at 21 cents per transaction. The Supreme Court in 2015 left in place a lower court’s ruling backing the regulation.

Corner Post in its 2021 lawsuit argued that the rule defied congressional intent and was “arbitrary and capricious” under a federal law called the Administrative Procedure Act.

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

The Fed last year proposed cutting the current cap to 14.4 cents per transaction.

(Reporting by John Kruzel; Editing by Will Dunham)