## Facts

- Congress enacted the Durbin Amendment to the Electronic Fund Transfer Act, directing the Federal Reserve Board to regulate (1) debit-card interchange fees and (2) network exclusivity/routing restrictions.
- The statute required interchange fees to be “reasonable and proportional” to issuer costs “with respect to the transaction,” and barred consideration of costs not specific to a particular debit transaction.
- The Board issued Regulation II, setting a debit interchange fee cap consisting of: a 21-cent base, plus 0.05% of transaction value for fraud losses, plus up to 1 cent for certain fraud-prevention costs.
- Regulation II also required each debit card to be enabled on at least two unaffiliated networks, but did not require that each individual transaction be routable over at least two unaffiliated networks.
- Merchant trade associations and individual merchants sued under the Administrative Procedure Act, arguing both the fee-cap methodology and routing rule conflicted with the statute.
- The parties filed cross-motions for summary judgment.

## Issues

1. Whether the Board’s interchange-fee standard unlawfully permitted recovery of cost categories the Durbin Amendment barred the Board from considering.
2. Whether the Board’s network non-exclusivity/routing rule unlawfully focused on “two networks per card” rather than ensuring at least two unaffiliated networks for each debit transaction.
3. What relief was appropriate under the APA if the challenged rules were unlawful.

## Decision

- The court granted plaintiffs’ motion for summary judgment and denied the Board’s motion.
- The court held the interchange-fee standard conflicted with the Durbin Amendment because it allowed recovery of costs not specific to a particular transaction and otherwise exceeded the statute’s cost limitations.
- The court held the routing rule conflicted with the Durbin Amendment because it did not secure merchants’ access to at least two unaffiliated networks for each transaction.
- The court vacated the challenged portions of Regulation II but stayed vacatur to allow the Board time to revise the regulations.

## Legal Principles

- Under APA review, an agency rule is unlawful if it is contrary to unambiguous statutory text or exceeds statutory authority.
- When Congress specifies which cost categories may (and may not) be considered, an agency cannot expand recoverable costs beyond those statutory limits while still claiming to satisfy a “reasonable and proportional” standard.
- A statutory routing mandate framed in terms of where a transaction “may be processed” can require transaction-level network choice; a card-level enabling rule may be invalid if it leaves some transactions effectively restricted to a single network.
- Vacatur is the ordinary remedy for unlawful agency action, but a court may stay vacatur to prevent disruption while permitting compliant replacement rules.

## Conclusion

The district court invalidated core elements of the Federal Reserve’s debit interchange fee cap and routing regulations, ruling that the Durbin Amendment limited recoverable costs to transaction-specific categories and required merchants to have at least two unaffiliated routing options for each debit transaction; the court vacated the rules but temporarily stayed that relief.


Nat’l Ass’n of Convenience Stores v. Bd. of Governors of the Fed. Rsrv. Sys., 958 F. Supp. 2d 85 (D.D.C. 2013)