The Eighth Circuit Court of Appeals heard oral arguments on February 19, 2026 in the federal government's appeal of a district court decision that vacated Regulation II's debit card interchange fee cap. The outcome will determine whether the 21-cent cap on debit interchange fees survives. The cap has governed US retail debit payment economics since its introduction in 2011.
Judge Daniel Traynor of the North Dakota District Court vacated Regulation II in August 2025. The court ruled that the Federal Reserve exceeded its statutory authority under the Durbin Amendment. The Board improperly included costs unrelated to specific electronic debit transactions when calculating the interchange fee cap. The ruling was a victory for Corner Post, Inc., a North Dakota truck stop that challenged the regulation.
The district court stayed its own vacatur to prevent debit interchange fees from becoming entirely unregulated. The current cap of 21 cents plus 0.05 percent of the transaction value remains in force while the Eighth Circuit considers the appeal.
The Federal Reserve filed its appeal in October 2025. The American Bankers Association and eight financial sector trade groups filed an amicus brief in February 2026 urging the court to reverse the vacatur. The Independent Community Bankers of America filed a separate brief with the same request. Both groups argued that eliminating interchange fee caps would harm community banks and credit unions.
Three outcomes are possible. The Eighth Circuit could reverse the vacatur, preserving Regulation II and the current cap. It could affirm the vacatur, potentially returning debit interchange fees to pre-2011 levels. Or it could remand the case with instructions for more limited relief.
Affirmation would not eliminate the Durbin Amendment itself, which remains law. Congress could direct the Fed to issue a replacement rule with a different cost methodology. The Federal Reserve could also develop a new rule on its own initiative.
Separate legislation targeting credit card interchange is moving through Congress. Senators Durbin and Marshall reintroduced the Credit Card Competition Act on January 13, 2026 as S.3623. The bill would require banks with over $100 billion in assets to enable at least two unaffiliated card networks for credit card transactions. Three attempts to attach the bill to larger legislative vehicles have failed. The Senate passed the 21st Century ROAD to Housing Act on March 12 without the CCCA amendment by a vote of 89-10.
The Eighth Circuit's decision is expected in the coming months. If the court affirms the vacatur, merchants processing debit card transactions would face higher acceptance costs. That shift could accelerate merchant adoption of account-to-account payment alternatives through ACH and instant payment rails.