By Matthew L. Cantor and Jeffrey I. Shinder
On August 6, 2025, shockwaves were sent throughout the commercial banking industry by an unlikely source – the United States District Court for the District of North Dakota. That court – not known as a juggernaut of financial-related jurisprudence – granted summary judgment to the Plaintiff in Corner Post v. Board of Governors of the Federal Reserve System. That case concerns an Administrative Procedure Act challenge to Federal Reserve regulations implementing the debit interchange regulation provisions of the so-called Durbin Amendment, which was enacted in 2010 as part of the Dodd-Frank Wall Street Reform Act.
In Corner Post, a North Dakota truck stop and convenience store argued that the Fed set the debit interchange caps, which limits the amount of interchange that issuers with over $10 billion in assets can reap on debit transactions, much too high. It argued that, in setting these caps, the Fed disregarded the will of Congress, which explicitly stated that debit interchange should be “reasonable and proportional to the cost incurred by the issuer” of “authorizing, clearing, and settling” a debit transaction or that are “reasonably necessary” to prevent fraud. Corner Post contended that, even though it costs issuers only a few pennies to authorize, clear and settle debit transactions, the Fed unlawfully ignored that evidence and set a much higher cap for debit interchange — 21 cents plus 5 basis points for purportedly fighting fraud.
The District Court agreed. In doing so, it followed the Supreme Court’s recent decision in Loper Bright Enterprises v. Ramaido, which overruled Chevron v. National Res. Def. Council and eliminated any need for courts to defer to interpretations of statutes by administrative agencies. Given that, the Corner Post court, in finding for the Plaintiff, correctly limited its deference to the Fed’s statutory interpretations. This straightforward decision should be affirmed on appeal.
As a result of this decision, the interchange that large issuers — like Chase, Citibank, Bank of America, Wells Fargo — receive on debit transactions will be lowered from the current 21cents plus 5 bps to 4 cents or less per transaction. Debit issuers were already confronted with the possibility of the cap declining from 21 cents to less than 15 cents when this decision landed on them like an earthquake. Now they face an even more drastic reduction in regulated debit interchange. When considering the number of debit transactions that derive from demand deposit accounts housed at these regulated, issuing banks, this ruling will likely cost them billions in annual interchange revenue.
But these banks will not bear this burden alone. Another result of this ruling is that the banks likely will put more pressure on the dominant payment card networks – Visa and Mastercard – to lower network fees, or to find other ways to compensate them for lost interchange, without running afoul of the anti-circumvention provisions in the Durbin Amendment.
And the banks could respond to this ruling in another way: they could buy a debit network and use that strategy to evade the Durbin Amendment. The Durbin Amendment debit interchange caps only apply to so-called “4 party networks;” that is, debit networks that have independent issuers and acquirers. Debit networks that clear transactions for a single bank – a so-called “3 party closed loop network” that has both issuing and acquiring functions – are exempted from the Durbin Amendment.
The Corner Post ruling might thus result in large banks acquiring one of the smaller debit networks, such as STAR or NYCE. If a large bank acquired one of those networks and operated it as a closed loop, the bank could set interchange rates unconstrained by the Durbin Amendment. Of course, to do that, merchants would have to agree to continue to accept STAR or NYCE transactions under a closed loop model – and they may not do that at interchange levels above the Durbin cap.
There is precedent for this outcome. Last year, Capital One acquired its own debit network – PULSE — through its acquisition of Discover and it is already converting its debit card portfolio to PULSE to evade the Durbin regulations. We anticipate that Corner Post will motivate Cap One to intensify these efforts.
Whatever the case, we expect that there will continue to be substantial debit market gyrations caused by the Corner Post decision in the weeks and months to come.
