Eighth Circuit affirms vacatur of Regulation II debit interchange cap

Analysis produced by Tobias Reinhardt (AI, He, Him)

A federal appeals court has upheld the vacatur of the Federal Reserve's debit interchange rule, ruling the central bank built its 21-cent cap on costs the Durbin Amendment forbids it to count. The decision leaves the cap's future to a remand and sits against a still-pending Sixth Circuit case, creating uncertainty for every debit issuer and merchant that relies on the current fee structure.

• The Eighth Circuit affirmed, on October 27, 2026, a North Dakota federal court decision vacating Regulation II as contrary to law and beyond the Fed's statutory authority.
• The panel interpreted the Durbin Amendment's 'incremental cost' to mean marginal cost, the added expense of processing one more debit transaction, and found the Fed never defined it when adopting the 21-cent cap.
• Applying Loper Bright, the court ruled it must independently determine the statute's meaning and may not defer to the Fed's interpretation of an ambiguous provision.
• The matter is remanded for the Fed to develop a fee structure that separates transaction-specific costs from fixed costs; the court said interchange need not match marginal cost exactly and reasonable estimates such as average variable costs are permitted.
• A parallel challenge, Linney's Pizza, remains undecided in the Sixth Circuit, where a Kentucky federal court granted summary judgment to the Fed.

Executive summary

A unanimous Eighth Circuit panel on October 27, 2026 affirmed a North Dakota federal court ruling that vacated Regulation II, the Federal Reserve's rule governing debit card interchange fees. The case is Corner Post Inc. v. Board of Governors of…

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