Supreme Court to Decide Fate of Swipe Fee Challenge

A North Dakota convenience store is challenging the Administrative Procedure Act's statute of limitations.
Angela Hanson
The U.S. Supreme Court

WASHINGTON, D.C. — The United States Supreme Court agreed to hear an appeal from a Watford City, N.D., convenience store related to the timeliness of its lawsuit challenging a Federal Reserve regulation on debit card swipe fees.

The retailer Corner Post is challenging the Federal Reserve's Regulation II, which was implemented in 2011 and capped the amount of interchange fees banks can charge merchants for processing debit card transactions. Corner Post and other plaintiffs hold that Regulation II violates the Durbin Amendment, a provision of the Dodd-Frank Act, according to a PYMNTS report. They argue that the cap on debit card swipe fees was set higher than intended by Congress.

[Read more: Convenience Store Retailers Urged to Take Up Fight Against Swipe Fees]

The central issue at hand is whether Corner Post's lawsuit was timely filed under the Administrative Procedure Act (APA), which has a six-year statute of limitations for rules challenges. Corner post filed suit 10 years after the publication of Regulation II, prompting the U.S. Court of Appeals for the Eighth Circuit to rule that the suit was brought too late because the time period in which to file APA claims started from the date of rule publication, not from the date of the alleged injury.

Corner Post claims that it met the deadline because it filed suit within three years of opening and first being injured by Regulation II, and that the Eighth Circuit's interpretation turns the statute of limitations for APA claims into a permanent obstacle to judicial review, reported Law360. The retailer and its supporters believe that the limitations period should begin when a plaintiff is allegedly injured by an agency action, a view that has been upheld by the U.S. Court of Appeals for the Sixth Circuit.

The National Retail Federation (NRF) praised the Supreme Court for agreeing to accept the case and resolve the state of the statute of limitations.

"Some lower courts have held that the statute of limitations to challenge the cap has run out even for small businesses that didn't exist until long after it was issued," stated NRF Chief Administrative Officer and General Counsel Stephanie Martz. "Regulations that ignore the intent of Congress and harm a business owner later don't become less arbitrary merely by the passage of time. Basic concepts of due process and fairness require federal agencies to adhere to the laws that Congress drafts regardless of when the rules to implement those laws were issued. It's been a dozen years since the Fed promulgated these rules, but Corner Post was harmed by them only recently and has every right to challenge them.

"Beyond the statute of limitations question, the Fed set the debit card swipe fee cap far too high in the first place and has failed to update it as required by Congress," Martz continued. "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."

Martz was initially co-counsel in the case. NRF is not a party to the case.

Since 2011, the Federal Reserve has reviewed banks' costs every two years as required by the legislation but has not met the requirement that it keep the fees proportional to costs, according to NRF. A Federal Reserve survey found that bank costs allowed under the Durbin amendment averaged 8 cents per transaction as of 2009, making the cap almost three times banks' costs; a 2019 survey found that the average cost was 3.9 cents, making the cap more than five times banks' costs.

Washington, D.C.-based NRF is the world's largest retail trade association.

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