Supreme Court Will Hear Store’s Lawsuit Over Allegedly Illegal Debit Card Swipe Fees

The North Dakota shop will try to convince the justices to waive a statute of limitations that expired so its lawsuit may proceed.

Visa and MasterCard credit card logos on a sign in Washington on March 30, 2012. Nicholas Kamm/AFP/Getty Images

The Supreme Court agreed to hear a case in which a store is asking the court to ignore a time limitation so it can challenge a Federal Reserve policy on debit card “swipe fees” that it argues is illegal.

The appeal comes amid merchant anxiety over high transaction processing fees and after the proposed Credit Card Competition Act was recently introduced in Congress.

The bill, promoted by Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.), is supposed to enhance credit card competition and reduce fees. The legislation would require banks with more than $100 billion in assets to allow card payments to be transmitted over at least one network that is in competition with what Mr. Durbin’s office termed the “Visa–Mastercard duopoly” that takes a 2 to 3 percent fee from a merchant every time a Visa or Mastercard is swiped.

Some critics say the legislation could, among other things, jeopardize the credit card rewards that Americans enjoy.

The National Retail Federation (NRF), which isn’t involved in the litigation, hailed the court for agreeing to take the case.

The Federal Reserve “set the debit card swipe fee cap far too high in the first place and has failed to update it as required by Congress,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said in a statement.

“Banks’ costs of processing transactions have fallen dramatically, and these fees continue to drive up costs for merchants and prices for consumers. Retailers are now paying twice as much as they should if the Fed had followed the law. If the Fed isn’t going to act on its own, the courts need to enforce the law.”

The decision to hear the case, Corner Post Inc. v. Board of Governors of the Federal Reserve System (court file 22-1008), came in an unsigned order on Sept. 29. No justices dissented. The court didn’t explain why it granted the order, and oral arguments in the case will be scheduled later.

The petitioner, Corner Post Inc., is a convenience store and truck stop in North Dakota that opened for business in 2018, according to the petition (pdf) the store filed with the court on April 13.

The store sued the Federal Reserve in 2021 under the Administrative Procedure Act (APA), contesting a 2011 rule that governs certain fees for debit card transactions.

Corner Post claimed in the petition that as a result of the policy, the store “has to pay hundreds of thousands of dollars year after year in unlawful debit-card fees.”

One provision in federal law cited by the store states, “A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.”

Another provision states that with certain exceptions, “every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues.” The store argues that the six years started when it opened, not when the rule went into effect.

In the lower courts, the store, alongside the North Dakota Retail Association and the North Dakota Petroleum Marketers Association, argued that the interchange and processing fees that merchants pay in debit card transactions were arbitrary and capricious and violated the so-called Durbin Amendment to the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010.

That amendment authorized the Federal Reserve to regulate “any interchange fee that an issuer may receive or charge with respect to an electronic debit transaction,” requiring such fees to be “reasonable and proportional to the cost incurred by the issuer with respect to the transaction,” according to the decision issued by the U.S. Court of Appeals for the 8th Circuit.

However, the store and the associations said the merchant fees charged violated the Durbin Amendment.

The 8th Circuit determined in December 2022 that the store’s claims under the APA were barred by the six-year statute of limitations, a position at odds with at least one other federal court of appeals. The court reasoned that the clock begins to run when the rule is published, not from the date a party claimed to have been injured by it.

This means that the limitation period ran out in 2017, a year before the store opened for business.

But the 8th Circuit didn’t explain how the store could have suffered legal wrong from or been adversely affected by the rule before it processed even one debit card payment subject to the rule, the petition said.

U.S. Solicitor General Elizabeth Prelogar had urged the Supreme Court to deny the store’s petition.

In her brief (pdf) filed on June 16, Ms. Prelogar wrote that the 8th Circuit was correct to reject the store’s argument that “a newly incorporated entity has six years to file APA challenges against any pre-existing agency regulations that might affect its interests, regardless of how long ago those agency regulations were adopted and regardless of whether the agency has taken any steps to enforce the regulations against the newly incorporated entity.”

The 8th Circuit’s decision “is consistent with other circuits’ decisions concerning the time limits for pursuing facial challenges to agency rules,” she wrote.

The petitioner’s attorney, Tyler Green of Consovoy McCarthy in Salt Lake City, and the U.S. Department of Justice didn’t respond by press time to a request by The Epoch Times for comment.

The North Dakota Retail Association and the North Dakota Petroleum Marketers Association aren’t parties to the Supreme Court appeal.

The Supreme Court is nearing the end of its traditional summer recess. It resumes hearing oral arguments on Oct. 2.