FRANKFORT, Ky.–In a ruling that conflicts with another court’s decision just a month earlier, a Kentucky U.S. District Court has ruled the Federal Reserve’s debit interchange Regulation II is lawful and reasonable.
As the CU Daily reported here, in August, in the “Corner Post” case, a North Dakota District Court found just the opposite, that the Fed’s approach to regulate interchange fees violates the Durbin Amendment by considering costs beyond authorization, clearance, and settlement. That decision was hailed by retailers.
In the Kentucky case, a retailer sued the Federal Reserve in 2022 arguing that the debit card interchange regulation improperly includes certain costs in its calculation leading to unfairly high fee cap, but the court dismissed the challenge, noted America’s Credit Unions.
At issue was Regulation II, which sets a debit interchange fee cap at 21 cents per transaction, plus a 0.05% ad valorem adjustment based on the transaction’s value.
Potential Appeals
“Both cases may now be appealed to different appeals courts, which could lead to additional legal uncertainty around Regulation II.” Said America’s Credit Unions in its analysis. “It also means that the issue may elevate to the U.S. Supreme Court to resolve the judicial split on the lawfulness of the Fed’s interchange law, Regulation II.”
The trade group noted that it earlier sent a letter to the Fed in the wake of the North Dakota decision in which it urged the Fed to withdraw its proposed update to Regulation II, as the decision “could complicate how the rule is administered, as without major revisions the rule would contain unresolved legal issues stemming from the court decision.”
