WASHINGTON, DC (June 9, 2026) |
The Defense Credit Union Council (DCUC) recently joined a coalition of leading banking and credit union associations in filing an amicus brief with the U.S. Court of Appeals for the Sixth Circuit, urging the Court to affirm the Federal Reserve Board's Regulation II, which governs debit card interchange fees and supports the continued operation of a secure, efficient, and widely accessible payments system.
The American Bankers Association, America's Credit Unions, Association of Military Banks of America, Consumer Bankers Association, Defense Credit Union Council, Independent Community Bankers of America, and Mid-Size Bank Coalition of America filed in response to an appeal challenging the Federal Reserve's long-standing interpretation of the Durbin Amendment and its implementation through Regulation II.
The coalition argued that the Federal Reserve's rule appropriately reflects congressional intent by ensuring interchange fees remain "reasonable and proportional" to the costs financial institutions incur in authorizing, clearing, settling, securing, and maintaining debit card transactions:
“Congress thus directed the Board to issue regulations ensuring that interchange fees for debit card transactions would be “reasonable and proportional” to issuers’ costs. Following that directive, and after an extensive rulemaking process, the Board issued Regulation II in 2011. The rule was promptly challenged by a merchant trade association making many of the same statutory interpretation arguments raised here, but the D.C. Circuit upheld the regulation and the Board’s statutory interpretation on which it is based. NACS v. Bd. of Governors of Fed. Rsrv. Sys., 746 F.3d 474 (D.C. Cir. 2014). In the decade-plus since, issuers have relied on Regulation II and the understanding it reflects that the interchange fee cap should be “reasonable and proportional” to their costs, subject to one express textual exception but no extra-textual ones. They have thus continued to invest heavily in maintaining and improving the debit card payments system for consumers and merchants alike.”
The amici notes that debit cards are a critical component of the U.S. economy, providing consumers with a secure, convenient, and widely accepted payment option while enabling merchants to efficiently serve customers. These benefits are made possible through substantial investments by financial institutions in payment processing infrastructure, fraud mitigation systems, network connectivity, and transaction authorization capabilities.
The amici also argues that the Federal Reserve's Regulation II properly implements the Durbin Amendment by accounting for transaction-specific costs incurred by issuers. This interpretation was previously upheld by the U.S. Court of Appeals for the D.C. Circuit in 2014 and has served as the foundation for payment system investments and operational planning across the industry
for more than a decade:
“Yet almost 15 years after Regulation II issued and 12 years after NACS, Linney’s Pizza and the merchant trade associations seek to upend that settled understanding. Raising many of the same statutory interpretation arguments that the D.C. Circuit considered and correctly rejected in 2014, Linney’s Pizza challenges Regulation II on the ground that the Board improperly included certain costs in the interchange fee cap calculation. The district court correctly rejected Linney’s Pizza’s arguments, concluding that Regulation II’s fee cap complied with the statute. Linney’s Pizza, LLC v. Bd. of Governors of Fed. Rsrv. Sys., 804 F. Supp. 3d 717 (E.D. Ky. 2025).”
The coalition warned that the plaintiffs' proposed interpretation would require the Federal Reserve to establish a dramatically lower interchange fee cap that fails to reflect the actual costs associated with processing debit card transactions. Such an outcome would force many issuers to facilitate transactions at a loss, undermine continued investment in payment security and innovation, and ultimately harm consumers.
“Linney’s Pizza’s construction of the statute cannot be squared with its text, structure, and purpose, nor with well-established constitutional and statutory interpretation principles. And Linney’s Pizza’s interpretation would produce absurd results, requiring issuers to facilitate debit transactions at a substantial loss—a result that is neither “reasonable” nor “proportional.” Slashing the interchange fee cap would impede issuers’ continued ability to facilitate safe and efficient transactions, hurting consumers. And doing so would grant merchants a windfall, as they have demonstrated that they will not pass on any savings to consumers. The Board complied with the statute when it included the categories of actual costs that Linney’s Pizza targets. Imposing a brand-new interpretation now would be extraordinarily harmful and needlessly disruptive to the diverse set of stakeholders in the debit card market—including consumers and merchants—that have relied on Regulation II and long-settled law upholding it. This Court should affirm.”
The brief further noted that previous reductions in interchange revenue have not resulted in meaningful savings being passed on to consumers by merchants. Instead, further reductions could lead to higher account fees, reduced access to debit card products, fewer financial services, and diminished investment in fraud prevention and cybersecurity protections.
For community financial institutions and credit unions, the consequences could be particularly severe. Although many smaller institutions are technically exempt from Regulation II's interchange fee cap, market pressures have already reduced interchange revenue across the industry. Additional downward pressure would disproportionately impact community-based institutions that rely on those revenues to support affordable financial services and member benefits.
“[T]he Retailers’ suggestion that the Board’s interpretation of the Durbin Amendment has led to excess issuer profits is unfounded. Retailers Br. at 14-19, 25-26. By the Board’s own admission, only 77 percent of issuers currently recover their “allowable” base component costs under Regulation II. Notice of Proposed Rulemaking, 88 Fed. Reg. at 78113. And, as explained above, those base component costs are only a subset of the full costs associated with debit transactions. Supra p. 13. Both the Durbin Amendment itself and the Board acknowledge that there are costs that are actually incurred by debit card issuers but that are not included in the Regulation II fee cap. See 15 U.S.C. § 1693o-2(a)(4)(B)(ii) (prohibiting the Board from considering “other costs incurred by an issuer which are not specific to a particular electronic debit transaction”); Final Rule, 76 Fed. Reg. at 43427-29 (providing examples of costs not included in the cap, such as corporate overhead). Issuers are obviously not earning exorbitant profits from debit card transactions while operating under a regulatory regime that does not even allow all issuers to recover all of their costs. As explained, revenues from interchange fees fail to reflect true costs. That means issuers have been forced to make difficult decisions about where to spend their capital—required to choose, for example, between innovating in the debit card payments system and offering free or low-cost consumer banking services.”
"The stakes extend far beyond interchange policy," says Jason Stverak, DCUC Chief Advocacy Officer. "At issue is the ability of credit unions to continue providing secure payment services, investing in emerging threats and technologies, and delivering value to the members and communities they serve. Weakening the existing framework would create uncertainty throughout the payments ecosystem while threatening services that millions of Americans rely upon every day."
The coalition emphasized the significant reliance interests at stake as Regulation II has been in effect since 2011, and the courts have repeatedly upheld the Federal Reserve's interpretation. The amici therefore urged the Sixth Circuit to affirm the district court's decision and preserve the regulatory certainty that has supported a balanced, competitive, and secure debit card marketplace for consumers, merchants, and financial institutions alike.