NextFin news, FRANKFORT, Ky. — On Friday, October 3, 2025, U.S. District Judge Gregory F. VanTatenhove upheld the Federal Reserve’s Regulation II, which caps debit card interchange fees, rejecting a lawsuit filed by Linney’s Pizza LLC, a Frankfort-based restaurant, that sought to invalidate the rule and reduce costs for merchants.
The case centered on the Fed’s 2011 rule limiting banks to collecting no more than 21 cents plus 0.05% of the purchase amount per debit transaction. Linney’s Pizza argued that the Federal Reserve miscalculated allowable costs and that the fee cap should be applied on an issuer-by-issuer, transaction-by-transaction basis, which the court found impractical and inconsistent with the statute.
Judge VanTatenhove’s opinion, dated September 12 and filed on September 15, clarified that the statute permits the Fed to include fixed costs related to authorization, clearance, settlement, transaction monitoring, fraud losses, and network fees in the fee cap calculation. The court emphasized that these costs are transaction-specific even if some are fixed, and that the Fed properly excluded general corporate overhead and card-program expenses.
The judge also addressed the legal standard for reviewing the rule following the Supreme Court’s 2024 decision to end Chevron deference, stating he independently interpreted the statute and found the Federal Reserve’s approach reasonable and within statutory limits.
This ruling contrasts with a recent August 2025 decision by a North Dakota federal court that vacated the same fee cap rule in the Corner Post case, though that ruling is currently stayed pending appeal to the Eighth Circuit.
The Federal Reserve’s debit card fee cap affects billions of transactions annually, with retailers contending that even minor fee adjustments impact prices and profit margins. With this decision, the fee cap remains in effect in Kentucky, and Linney’s Pizza’s challenge is dismissed.
The case highlights ongoing national litigation over Regulation II, with further appeals expected, including the pending Eighth Circuit review of the Corner Post decision.
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