US appeals court strikes down the Fed's 21-cent debit interchange cap and orders a rewrite

On Monday 26 October 2026 a three-judge panel of the US Court of Appeals for the Eighth Circuit upheld a lower-court decision that threw out the Federal Reserve's cap on debit card interchange. The case was brought by Corner Post, a truck stop and convenience store in Watford City, North Dakota, which sued the Fed in 2021. A federal judge in North Dakota sided with the retailer in August 2025, and the appeals court has now affirmed that ruling and sent the rule back to the Fed. The cap sits in Regulation II, the rule the Fed wrote in 2011 to carry out the Durbin Amendment. It limits what large debit issuers can charge per transaction to 21 cents plus 0.05% of the purchase, with an extra cent for issuers that meet fraud-prevention standards. The court held that Congress told the Fed to look at the incremental cost of authorising, clearing and settling each transaction, and that the Fed went too far by also counting fixed costs, network processing fees, fraud-prevention spending and fraud losses. The judges said the Fed may use a proxy such as average variable cost, but must at least separate transaction-specific costs from the rest. The Fed proposed cutting the base fee to about 14.4 cents in October 2023 but never finalised that change, and a spokesperson declined to comment on the ruling. The coverage does not say what will replace the vacated cap or when any new figure would take effect. A similar challenge, Linney's Pizza, is pending in the Sixth Circuit after a Kentucky court upheld the rule, so a split between circuits and a Supreme Court appeal are possible. For online merchants, debit interchange is one of the largest costs of accepting cards in the US, and a cap built only on transaction-specific costs could end up well below today's level. Merchant groups welcomed the decision, while bank and credit union groups said they were deeply disappointed and that it is not the last word. Nothing changes on statements yet, but the ruling sets the direction for the next version of the rule.