Before announcing the outcome of last week’s Supreme Court decision in Corner Post Inc. v. Board of Governors of the Federal Reserve System, Justice Amy Coney Barrett joked that it wasn’t the case the multitude had packed the courtroom to hear. And with the presidential immunity decision being handed down minutes later, the case of Corner Post has been a bit crowded out of the news cycle.
Which is unfortunate.
Because whatever one’s views on the tribulations (and trials) of a certain Donald J. Trump, what happens on remand in Corner Post might well have a lasting impact on something everybody does: buying stuff.
According to the critics, because the Corner Post decision eases the path for people who sue administrative agencies, it represents just the latest fusillade in the court’s assault on the regulatory state. But I’m less sure that Barrett’s majority opinion is wrongheaded. And I’m intrigued that courts might soon be called upon to examine the merits of the “interchange” fees merchants pay to banks for debit card transactions.
That might not be a bad thing.
The case involves a challenge to a Federal Reserve rule called Regulation II, issued in 2021 under Dodd-Frank, to get a handle on debit card swipe fees. The rule, which applies to cards issued by banks with $10 billion or more in assets, sets a maximum debit card fee of .05 percent of the amount of the transaction, plus 21 cents. After Regulation II went into effect, the fees fell immediately, some by well over half.
Sounds good, right? The trouble is, many businesses think interchange fees are still too high — and they blame the Fed. The statute requires the Fed to assure that the fees “shall be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.” Retailers argue that the ceiling of .05 percent plus 21 cents is neither reasonable nor proportional. Efforts to litigate the issue have been unavailing.
Enter a North Dakota truck stop called Corner Post. In 2021, the truck stop sued the Fed, asserting that the rule’s statutory maximum fee was more than what Dodd-Frank allows. What makes the lawsuit unusual is that Regulation II was finalized in 2011 — a full decade before the suit was filed, and seven years before Corner Post opened for business.
A plaintiff who wants to challenge a federal agency rule on its face must file suit “within six years after the right of action first accrues.” The Supreme Court, in a 6-3 decision, held that the six-year period begins not when the rule takes effect, but “when the plaintiff has a complete and present cause of action.”
In the case of Corner Post, no injury was suffered in 2011, when Regulation II went into effect, or in the ensuing seven years, because the truck stop did not exist.
That is what worries the critics. Taking the majority seriously, were I to launch a new business tomorrow, the next day I’d be able to file suit against almost any extant administrative regulation, no matter how ancient and venerable, as long as the rule costs me money.
But private entities get sued all the time to halt long-standing practices said to have caused the plaintiff harm. It’s not clear why government agencies shouldn’t bear the same risk.
Swipe fees on debit and credit cards alike are regressive. Except in the rare case of a retailer that gives an explicit discount for cash — gas stations provide a prominent example — the fee is factored into the price of the good. Those fees, in turn, help subsidize credit card rewards, which are most likely to accrue to wealthier shoppers. Those who don’t use plastic subsidize those who do, paying the same price and getting none of the benefits. This is a well-known difficulty. Thus do lower-income customers (and older ones) subsidize the well-off.
None of this is what Corner Post had in mind in filing suit, and the puzzle might not have a regulatory solution. But only if rules are repeatedly tested are we likely to have a serious conversation on such topics.
Stephen L. Carter is a Bloomberg Opinion columnist and a law professor at Yale University.
