Kentucky Court Upholds Reg II Interchange Fee Standard
Posted: Sep 17 2025
A federal judge in Kentucky granted the Federal Reserve’s motion for summary judgment in a lawsuit seeking to overturn how it calculates debit card interchange fees, with the decision coming roughly a month after a separate court in North Dakota reached the opposite conclusion in a similar case.
The Durbin Amendment of the Dodd-Frank Act requires the Fed to set reasonable and proportional interchange fees for debit card transactions. In 2022, Linney’s Pizza in Frankfort, Kentucky, sued the Fed in U.S. District Court for Eastern Kentucky over the regulation used to implement the law – Regulation II – alleging that the central bank exceeded its statutory authority because it included “improper costs” in its calculation, resulting in too high a fee cap.
In an opinion, District Judge Gregory F. Van Tatenhove granted the Fed’s request for summary judgment and dismissed the lawsuit. He found that Reg II is not contrary to law, nor is it arbitrary and capricious.
“Fundamentally, what Linney’s Pizza fails to recognize is that the [Fed] board must balance competing considerations, beyond just making comparisons between debit card transactions and checking transactions,” Van Tatenhove wrote. He added that the Durbin Amendment acknowledges that debit card transactions will have at least some fees associated, “and the board adequately considered the similarity between debit card transactions and checking transactions as one relevant factor in setting the interchange fee.”
U.S. District Court Judge Daniel Traynor in North Dakota reached a different conclusion last month in a separate lawsuit brought by a group of state retailer trade associations and truck stop Corner Post. He ruled that the Durbin Amendment “clearly prohibits” the consideration of any costs except for incremental authorization, clearance or settlement costs in setting fees. The judge also criticized the Durbin Amendment as confusing and not particularly well written.
Both court decisions could be appealed to separate appeals courts.