What banks should know about SCOTUS' 'swipe fee' ruling – American Banker

Corner Post It’s a relatively remote gas station. Waterford CityA town in western North Dakota with a population of about 6,000, this town is the global center of North Dakota’s businesses. Financial Services, payment And many other industries Challenge Rules.

of supreme court The Federal Reserve Board ruled 6-3 on Monday that Corner Post can sue over a 2011 rule that governs “swipe fees,” or the funds that companies pay banks for debit card payments. An appeals court in St. Louis had previously ruled that Corner Post couldn’t sue the Fed because the six-year statute of limitations had expired. The gas station opened in 2018 and began accepting debit cards seven years after the 2011 rule. Monday’s ruling effectively struck down the statute of limitations.

As a result of this ruling, timing is not necessarily a deterrent for companies that have filed complaints, lawsuits or other legal challenges to the regulations.

Eric Glover, a principal at Intrepid Ventures, called the Cornerpost decision “significant.” “It will undoubtedly make it easier for the banking and payments industry, and indeed for everyone, to challenge regulation,” he said.

The Supreme Court’s ruling on Monday focused solely on the statute of limitations and did not address the merits of any specific laws or regulations.

“Merchants that began accepting debit cards more than six years after the debit fee rules were finalized can still sue if they believe they were harmed by the Federal Reserve’s regulations,” said Stephanie Martz, chief administrative officer and executive director of the National Retail Federation, which supported Monday’s ruling.

The ruling will put pressure on regulators. Evolving over timeIn the case of the Dodd-Frank debit fee provisions that were the subject of Cornerpost’s lawsuit, banks and merchants will find it easier to challenge how quickly and to what extent the law changes. Businesses will also find it easier to sue over more static laws that existed before they began operating, making it easier to challenge the validity of older regulations and laws. “This decision serves as a lesson for government agencies,” Martz said.

It’s unclear what impact it will have on financial regulations such as Regulation II, according to Aaron Press, director of worldwide payments strategies research at IDC, referring to the Durbin Amendment to the Dodd-Frank Act, which aims to increase competition in debit card processing.

“The plaintiffs in this case are not opposed to regulation. In fact, they want to see stronger interchange regulation and lower price caps,” Press said. “If the plaintiffs are successful, we could see a decline in debit interchange. Of course, that possibility exists anyway, and the Fed has already signaled plans to revisit the issue.”

Monday’s ruling could potentially work against the plaintiffs. If banks and card companies challenged the fee rules in line with the Supreme Court’s new standard, they could win and theoretically raise interchange rates. But that outcome is unlikely, Glover said. “In my view, the big debit card issuers don’t have a compelling argument that the Fed doesn’t allow them to recover costs through interchange,” Glover said.

The Supreme Court’s Corner Post ruling follows last week’s ruling. Chevron’s RespectThe end of Chevron deference gives regulators and other agencies more latitude when writing regulations. The end of Chevron deference is also expected to lead to increased litigation against regulators.

The Supreme Court’s split in the Cornerpost decision was similar to that in the Chevron decision, with conservative Justices Amy Coney Barrett, Samuel Alito, Neil Gorsuch, Brett Kavanaugh, Clarence Thomas, and Chief Justice John Roberts ruling in support of the Cornerpost position. Liberal Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson dissented.

Kavanaugh joined Barrett’s majority opinion. Administrative Procedure Act The Supreme Court’s “Rules of Civil Procedure,” which govern how the rules are written, have a basic presumption that parties “injured” by a government agency’s actions are entitled to judicial review. Justice Jackson’s dissent argued that this decision allows “wealthy litigants” to game the system by forming new entities or finding new plaintiffs to sue the government.

According to Cornell University law professor Robert Hockett, today’s Interchange decision further strengthens the impact of the Supreme Court’s Chevron decision. “Until now, Congress had legislated that a regulatory rule became settled law if it was unchallenged for six years. The Court is now telling us that we can’t start counting those years with respect to specific affected parties until the rule at issue actually affects them,” Hockett said. “Because corporations can’t be affected before they are formed, and new corporations can be formed at any time, to get around the rule, all one has to do is form a new corporation and challenge the rule.”

Conservative groups such as Charles Koch’s Americans for Prosperity and lobbyists such as the U.S. Chamber of Commerce supported the Corner Post.

“This ruling is a major victory for individuals and businesses that were subject to problematic regulations but were unable to challenge them because time had passed,” Kara Rollins, litigation counsel for the civil rights group New Civil Liberties Union, said in a statement.

The Biden administration, representing the Federal Reserve Board, argued that a corner post position would expand the scope of potential challenges to government regulations and burden courts and government agencies.

“The Supreme Court has opened a Pandora’s box of attacks on long-established policies and regulations, dealing a blow to people and communities across the country,” Skye Perryman, president and CEO of Democracy Forward, a nonprofit legal services firm, said in a statement. “Today’s decision will likely lead to a flood of lawsuits from special interests challenging policies and regulations that don’t serve their short-term objectives, even years from now.”