Regulation II
Corner Post Inc. v. Board of Governors of the Federal Reserve System
Date: March 23, 2026
Issue: Whether Regulation II’s (Reg. II) standard for reasonable and proportional interchange fees exceeds the Federal Reserve’s (the Fed) statutory authority and contradicts the Durbin Amendment.
Case Summary: The Fed filed a reply brief in the Eighth Circuit appealing a North Dakota Federal court decision that vacated Reg. II.
Previously, Judge Daniel M. Traynor of the U.S. District Court for the District of North Dakota vacated Reg. II, holding that the rule is contrary to law and the Fed exceeded its statutory authority. Judge Taynor temporarily stayed the decision to give the Fed time to appeal his decision and “to prevent interchange transaction fees from becoming a completely unregulated market.” Judge Traynor later stayed the vacatur of Reg. II pending the resolution of the appeal, “to prevent interchange transaction fees from becoming a completely unregulated market.
On Dec. 30, 2025, the Fed filed its opening brief in the Eighth Circuit and argued that the Durbin Amendment gave it broad discretion, that it correctly included the costs at issue, and that it properly adopted uniform fee standards. In response on Feb.13, 2026, Corner Post contended that Reg. II is contrary to law, exceeds the Fed’s authority, and its fee standard is arbitrary and capricious. ABA also filed a coalition amicus brief urging the Eighth Circuit to reverse. ABA argued that including certain costs in the interchange fee cap is consistent with the Durbin Amendment’s text and purpose, slashing the interchange fee cap would not help consumers and would harm the debit card market, and affirming the district court would disturb reliance interests by rejecting settled precedent and destabilizing the debit card market.
In its reply brief, the Fed argued that it acted under the best reading of the statute and within the bounds of delegated discretion. The Fed maintained that Corner Post’s arguments concerning delegation and discretion are misplaced, explaining that Congress used broad language that delegates substantial discretion to set a reasonable and proportional fee. The Fed explained that the Durbin Amendment does not restrict its discretion, as Corner Post contends, and rejected Corner Post’s claim that it relied on statutory silence or outdated deference principles. Instead, the Fed pointed to ordinary canons of construction and its consistent interpretation of the Durbin Amendment as support for its reading.
The Fed also maintained that the Major Questions Doctrine does not apply because Regulation II reflects a longstanding regulatory approach, not an expansion of agency authority. Corner Post responded that the Fed treated silence as a residual source of authority, that its interpretation is not longstanding or persuasive, and that Regulation II is unlawful under traditional interpretive tools and the Major Questions Doctrine.
The Fed also explained that it respected the limits of congressionally delegated discretion. The Fed emphasized that the Durbin Amendment did not limit its discretion to include costs that were neither expressly included nor excluded, because Congress did not intend the law to cover only two types of costs. The Fed added that Corner Post’s reading fails to give separate significance to Congress’s overall mandate of reasonableness and proportionality, which would otherwise serve no real purpose. It also explained that it was permitted to include four cost categories the district court found prohibited, including fixed authorization, clearance and settlement costs; transaction monitoring costs; fraud losses; and network processing fees, because each relates to a specific debit transaction and is not barred by the Durbin Amendment. Stressing that it properly adopted uniform fee standards based on the cost of a representative transaction, the Fed argued the Durbin Amendment does not require a transaction-specific or issuer-specific cap, and more granular standards would be unworkable and inconsistent with agency line drawing.
Finally, the Fed argued that supposed procedural irregularities do not provide an independent basis for affirming the district court’s order. It explained that the Fed engaged in reasoned rulemaking in compliance with all procedural requirements by reviewing every relevant factor, including the similarities between debit and checking transactions, and by defining the terms necessary to apply the Durbin Amendment. The Fed also explained that its decisions were not arbitrary or capricious because it evaluated the evidence, addressed the issues before it, and was not required to define every term Corner Post questions. It also maintained that any purely procedural flaws would not have warranted vacatur, because the proper remedy would be to return the rule for clarification rather than eliminate it.
Bottom Line: Briefing has concluded in the Eighth Circuit, but the date for oral argument has not been set yet.
Document: Brief
