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Wrestles with US Supreme Court bid to challenge debit card ‘swipe fee’ rule

U.S. Supreme Court justices engaged in a significant debate on Tuesday regarding a challenge brought forth by a convenience store in North Dakota against a government regulation concerning debit card “swipe fees.” The case could potentially impact businesses’ ability to contest longstanding federal rules.

At issue was whether the store, known as Corner Post and located in Watford City, had filed its lawsuit in a timely manner. The store initiated legal action in 2021, contesting a 2011 Federal Reserve regulation governing the fees businesses pay to banks for debit card transactions. Lower courts had dismissed the lawsuit, citing the six-year statute of limitations typically applicable to such cases. However, Corner Post argued that since it opened for business in 2018, its legal grievance arose after the statute of limitations had expired.

With a conservative majority on the bench, the Supreme Court has recently shown skepticism towards the authority of federal agencies. During the proceedings, liberal and some conservative justices expressed differing views on the implications of allowing lawsuits like Corner Post’s to proceed after the expiration of the six-year deadline.

Swipe fees, also referred to as interchange fees, are charges paid by businesses to banks for debit card transactions. The Federal Reserve’s 2011 rule established a cap of 21 cents per transaction for these fees.

Justice Elena Kagan raised concerns about the potential disruption that could ensue if the court were to permit lawsuits like Corner Post’s to be filed many years after a regulation’s enactment. Conversely, Corner Post’s argument, supported by conservative Justice Neil Gorsuch, posited that the statute of limitations should commence only when a legal injury occurs.

The case has drawn attention from various conservative and corporate groups, including billionaire Charles Koch’s network and the U.S. Chamber of Commerce, who argue that businesses should have the freedom to challenge regulations they deem unlawful.

A decision on the matter is anticipated by the end of June. This case holds significance as it could potentially impact businesses’ ability to contest federal regulations perceived as burdensome or unlawful.

Before the 2010 Dodd-Frank Wall Street reform law, swipe fees were considerably higher, making it challenging for small businesses to accept debit cards. The Federal Reserve’s subsequent implementation of the 21-cent cap prompted legal challenges from retailers, including Corner Post, who felt the cap was too high. Despite previous litigation, the Supreme Court upheld the regulation in 2015.

Corner Post’s lawsuit contended that the Federal Reserve’s rule contradicted congressional intent and violated the Administrative Procedure Act. However, lower courts dismissed the suit based on the statute of limitations.

The Federal Reserve has proposed further reducing the cap to 14.4 cents per transaction, though this adjustment has yet to be finalized.

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