From Caps to Courtrooms

Today in Payments

August 15, 2025

This week’s payments news is packed with lawsuits and regulatory challenges. A federal judge struck down the Fed’s debit card interchange cap but stayed the ruling pending appeal. New York’s attorney general sued Early Warning over Zelle fraud, Fiserv faces an investor lawsuit tied to Clover migration practices, and JPMorgan is sparring with fintechs over costly data requests.

Welcome to Today in Payments, I’m your host, Patti Murphy, here with your weekly dose of payments notes.

Payments can be a litigious business, as this week’s reporting shows.

Fed’s Debit Cap Struck Down

A federal district court judge in North Dakota has struck down the Federal Reserve’s rule capping debit card interchange. 

But Justice Daniel M. Trayner of U.S. District Court for the District of North Dakota stayed his decision (put it on hold) until the Fed has an opportunity to present an appeal to the U.S. Circuit Court for the Eighth Circuit, in St. Louis. 

He added that his decision does not prevent the Fed from moving forward with a proposal to lower the debit interchange cap to 14.4 cents plus 4 basis points (0.04 percent) of the transaction amount plus 1.3 cents to cover fraud prevention costs. That proposal has been pending for about two years.

In a detailed, at times colorfully written decision, Justice Trayner ruled the Fed “improperly interpreted” the Durbin Amendment when he set the cap at 21-cents plus 5 basis points (0.5 percent) and an extra penny for meeting certain fraud prevention criteria. The cap should have been set much lower, he wrote, siding with Corner Post, a truck stop and convenience store that sued the Fed over the cap in 2018.

The only costs that should have been included in the Fed’s calculations were transaction authorization, clearing and settlement fees, the judge ruled. Instead, the Fed improperly included costs like network fees, transaction monitoring costs and fraud losses in determining the base fee.

Not surprisingly, merchant groups cheered the ruling while organizations representing banks panned it.

NY Sues Early Warning Over Zelle Fraud Losses

The New York Attorney General has filed a lawsuit against Early Warning Services, alleging the bank-owned payments company allowed fraud to flourish on its P2P network Zelle for years, resulting in consumer losses in excess of $1 billion.

The lawsuit, filed in state court, pretty much mirrors a federal lawsuit brought by the Consumer Financial Protection Bureau against Zelle and several of its owner banks last year. That lawsuit was dropped in March by the Trump Administration. But that didn’t keep Congressional Democrats from demanding information from member banks on how they monitor and address fraud.

In a heavily redacted lawsuit alleges Zelle, in its haste to get a bank-owned P2P network to market dropped the ball on security, despite assurances to the contrary. “EWS’s design of a quick and frictionless enrollment process for the Zelle network made the Zelle network a compelling vector for both [account] takeover fraud and induced fraud [i.e., scams],” the lawsuit alleges.

The lawsuit, filed by state Attorney General Letitia James, further alleges that EWS had developed safeguards against fraud as far back as 2019, but they were never adopted until 2023. It also claims that participating banks routinely failed to report frauds. These failures cost consumers in New York and other states hundreds of millions of dollars.

The attorney general wants Zelle to: 

• maintain “basic network safeguards” along with anti-fraud measures, 
• pay restitution to defrauded New York consumers, and 
• disgorge any profits gained from the alleged fraudulent transactions.

Fiserv Faces Investor Lawsuit Over Clover Migration

Fiserv and its key executives are facing a class action lawsuit alleging it misled investors about growth of its Clover POS platform. The lawsuit, spearheaded by the City of Hollywood Police Officers’ Retirement System alleges that “forced conversions” of merchants from Fiserv’s Payeezy platform to Clover led to artificially inflated revenue growth and gross payment volume for Clover, while hiding a slowdown in new merchant acquisitions.

The complaint alleges this all came to light in April of 2025 when Fiserv reported gross payment volume (GPV) growth for Clover of just 8% for the first quarter of 2025, “a material step down from 2024” which saw GPV growth of between 14% and 17%.

The complaint attributed the slowdown in growth to a “substantial portion of these migrated customers” leaving Fiserv for less expensive competitors like Square and Toast.

The Milwaukee-based company disputes the allegations, asserting in a statement that it “will vigorously defend itself in the lawsuit.”

The lawsuit is pending in U.S. District Court for the Southern District of New York.

JPMorgan Complains Fintech Middlemen Taxing its Systems

Here’s an interesting item I picked up from CNBC: JPMorgan Chase is complaining that fintech companies that help financial apps connect with traditional checking accounts are flooding the bank’s systems with unnecessary data requests.

Of the nearly 2 billion data requests from middlemen hitting JPMorgan’s systems in June, just 13% were customer initiated, according to an internal memo CNBC said it had gotten its hands on. Most of the data pulls were for purposes ranging from helping the companies improve their products or prevent fraud, to harvesting data for sale to other third parties.

You may recall a news item from a month or two ago about how the mega-bank was planning to charge fintechs for accessing customer data. That led to accusations that the bank was engaging in “anti-competitive, rent-seeking behavior” according to reporting by Bloomberg. Now the bank says it’s incurring rising costs from maintaining the infrastructure needed to handle growing volumes of data pulls. According to the memo, the total volume of calls received by the bank has more than doubled in the past 2 years.

Plaid said in a statement to CNBC that JPMorgan Chase’s complaint “misrepresents how data access works” because all activity begins when customers grant permission to fintech companies when they sign up for accounts. “Calling a bank’s API when a user is not present once they have authorized a connection is a standard industry practice supported by all major banks in order for consumers to get critical alerts for overdraft fees or suspicious activity,” Plaid told the news outlet.

That’s all for Today in Payments. Stay tuned for your weekly dose of payments notes.