Unpacking the Recent Corner Post Decision

This week, we’re taking a second to dig into the recent federal court decision impacting debit interchange. The U.S. District Court for the District of North Dakota ruled in the Corner Post, Inc. v. Board of Governors of the Federal Reserve System case that the Federal Reserve had exceeded its authority when it included a fraud-loss adjustment and other essential costs in the 2011 debit interchange rule.

If the decision holds on appeal, the impact on debit interchange could be significant. What will be the potential impacts, pending appeal? Let’s dive right in and break it down.

What are the Facts?

You may recall that the U.S. Supreme Court heard this case last year and sent it back to the District Court. This decision is now coming from that court. The facts in the Corner Post, Inc. v. Board of Governors of the Federal Reserve System case are fairly simple.

In 2011, the Federal Reserve issued Regulation II, which regulates debit interchange fees. Corner Post, which is a truck stop and convenience store in North Dakota, only began accepting debit card payments at their establishment in 2018. So, prior to that they were not paying debit interchange. They then joined a Regulation II lawsuit in 2021 arguing that Regulation II was arbitrary and capricious. In other words, they argued that Regulation II was created without proper consideration of facts, evidence or law.

A key early question was whether the claim was barred by the statute of limitations. In 2024, the Supreme Court held that the “harm” began when Corner Post started accepting debit cards (2018), meaning the case could move forward. The Court sent it back to the District Court—leading to the decision we have today.

What Happened and Where are We Now?

The District Court ruled that the Federal Reserve overstepped its authority when adopting Regulation II in 2011 and vacated the rule. However, because the Fed has appealed, the decision is temporarily stayed — Regulation II remains in effect while the case is pending.

The Court also clarified that this ruling does not block the Fed’s current Regulation II rulemaking, which — if finalized — would lower the debit interchange fee.

So, where are we now? The Federal Reserve Board has appealed the decision to the Eight Circuit. So, we will wait to see what happens on appeal, and if the Federal Reserve loses at the Eight Circuit, there is a possibility that we will see this case head all the way back up to the U.S. Supreme Court…AGAIN.

What are the Impacts of this Decision?

For now, nothing changes—Regulation II is still in force until the case is resolved. But if, at the end of the process, the rule is struck down, debit interchange fees will almost certainly change—and likely not in credit unions’ favor.

To sum it up…

Interchange is under attack at all levels. While you have likely heard of interchange legislation being passed at the state level, though not in Michigan, it’s important to stay vigilant. We will keep you updated as this case progresses through the courts and what the ultimate impact will be on credit unions.

As always, this article is intended for general information only and does not constitute legal advice. If you have any questions about this topic and/or possible implications, you should contact your attorney for advice.

Hope to see you next time when we take a second to discuss another legal topic in the financial services industry!

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