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Supreme Court allows complaint over debit charges to proceed

Supreme Court allows complaint over debit charges to proceed

The Supreme Court ruled Monday that a lawsuit by a group of North Dakota merchants challenging the Federal Reserve’s debit card exchange rate can proceed.

The case, filed in 2021, was previously blocked because a lower court ruled, and an appeals court agreed, that the complaint was barred by a six-year statute of limitations. But the Supreme Court disagreed in a 28-page opinion issued Monday, saying the statute of limitations did not apply “until the plaintiff is injured by final agency action,” and therefore the lawsuit in this case is moot extinguished.

As a result, the plaintiffs, which include a truck stop and convenience store in Watford City, North Dakota called Corner Post, and two trade groups, the North Dakota Petroleum Marketers Association and the North Dakota Retail Association, can proceed with their lawsuit alleging that the Fed set debit exchange rates too high. They have argued that a Fed rule allows for higher fees than the Administrative Procedure Act allows.

The rates set by the Fed under Regulation II have been a point of contention for traders for years after the rule was introduced in 2011 under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

For the first time, the Fed said last October that it would lower the amount that card issuers can charge merchants when consumers pay with debit cards. Currently, the cap is set at 21 cents plus 0.05% of the value of the debit transaction, plus a 1-cent adjustment to prevent fraud. The fee cap applies to banks and financial institutions that issue debit cards and have $10 billion or more in deposits.

The Fed has faced criticism from payment companies who argue that the proposed cut in borrowing rates is too much, and from retailers and other merchants who argue that the cut is too little. The central bank was bombarded with public comments on its proposal.