NFIB Backs Small Business Challenge to Federal Reserve Debit Fee Cap

What Happened

On May 9, 2026, the National Federation of Independent Business filed an amicus brief addressing debit card interchange fees in the U.S. Court of Appeals for the Sixth Circuit, supporting a legal challenge to the Federal Reserve's debit card interchange fee regulations. The case, Linney's Pizza, LLC v. Board of Governors of the Federal Reserve System, was originally brought in 2022 by a restaurant in Frankfort, Kentucky, claiming the Federal Reserve's implementation of the Durbin Amendment's fee cap was unjustified and set too high.

The Durbin Amendment, part of the Dodd-Frank Act enacted in 2010, directed the Federal Reserve to regulate debit card interchange fees—the charges merchants pay to process debit transactions. The law aimed to reduce these fees and pass savings along to consumers and small businesses. According to NFIB's official advocacy announcement, the trade association argues the regulation has not achieved its intended purpose for small merchants (NFIB Advocacy).

The Federal Reserve currently caps debit interchange fees at approximately 21 cents per transaction plus 0.05 percent of the transaction value for covered issuers, with an additional 1-cent fraud prevention adjustment available (Federal Reserve Regulation II). The Fed proposed lowering this cap in late 2023, but the change has faced ongoing legal and industry challenges.

Why It Matters

Payment processing costs represent a significant operating expense for small businesses, particularly those in retail and food service with high transaction volumes and lower average ticket sizes. According to the Federal Reserve's most recent Payments Study, debit cards accounted for over 31 percent of all non-cash payment transactions by number, making interchange fees a recurring cost concern for merchants (Federal Reserve Payments Study).

For a business like Linney's Pizza, which processes numerous small-dollar debit transactions daily, even modest per-transaction fees compound into substantial annual costs. NFIB has long argued that while large retailers gained negotiating leverage after the Durbin Amendment, small businesses often saw limited benefit because payment networks and processors adjusted their fee structures.

The Federal Reserve Small Business Credit Survey consistently shows that managing cash flow and operating costs ranks among the top challenges for small firms. The most recent Fed SBCS release indicates that 66 percent of employer firms faced financial challenges in the prior year, with rising costs cited as a primary concern (Federal Reserve Small Business Credit Survey, 2024 release).

If the Sixth Circuit rules in favor of the plaintiffs, it could force the Federal Reserve to reconsider how it calculates and sets interchange fee caps—potentially leading to lower costs for small merchants or, conversely, creating uncertainty in payment markets.

What Small Business Owners Should Do

Review your payment processing statements. Understanding your current interchange costs is the first step to identifying savings opportunities. Look for line items related to debit interchange, network fees, and processor markups. For a comprehensive understanding of small business financing costs, see our guide to business loan fees.

Compare processor pricing models. Some processors offer interchange-plus pricing that passes through actual interchange rates, while others bundle fees into flat rates. For businesses with high debit volume, interchange-plus often provides better transparency and potential savings.

Consider your payment acceptance mix. Evaluate whether encouraging alternative payment methods—such as ACH transfers for recurring customers or cash discounts where legally permitted—could reduce your overall processing costs. Restaurant owners may find additional guidance in our restaurant financing overview.

Stay informed on regulatory developments. The outcome of this case and any Federal Reserve response could affect debit processing costs industrywide. Trade associations like NFIB provide updates on regulatory matters affecting small business operations.

Document your interchange expenses. If regulatory changes do occur, having historical data on your payment costs will help you assess whether promised savings materialize and negotiate effectively with processors.

FAQ

What is the Durbin Amendment and how does it affect small businesses?

The Durbin Amendment is a provision in the 2010 Dodd-Frank Act that directed the Federal Reserve to regulate debit card interchange fees charged by large banks. It caps the fees that card-issuing banks with over $10 billion in assets can charge merchants. While intended to lower costs for all merchants, small businesses have argued the benefits primarily went to large retailers with more negotiating power.

How much do debit card interchange fees cost small businesses?

Under current Federal Reserve regulations, covered issuers can charge approximately 21 cents plus 0.05 percent per debit transaction, with a potential 1-cent fraud prevention adjustment. For a small restaurant processing 200 debit transactions daily at an average of $15 each, this translates to roughly $15,000-$20,000 annually in interchange fees alone, before other processing costs.

What happens if the lawsuit succeeds?

If the Sixth Circuit rules in favor of Linney's Pizza and NFIB's position, the Federal Reserve may need to revisit its interchange fee methodology. This could result in lower fee caps, different calculation methods, or broader exemptions. However, any changes would likely take months or years to implement, and the case could be appealed further.