Bernanke told the Senate Banking Committee that the Durbin amendment, which limits the fees banks can charge retailers for swiping debit cards, that he was unsure if a major part of the provision would work as intended.
While Durbin's amendment would dramatically reduce the so-called interchange fees banks can charge, it included an exemption for small banks with less than $10 billion in assets.
But Bernanke told lawmakers that he was not sure if the exemption would work as intended, saying that market forces could require smaller banks to voluntarily lower their fees to compete with big banks, or that debit card networks might be unwilling to establish multiple tiers to handle different fee structures.
"There is some risk that exemption will not be effective," he said.
His comments led to a series of rapid responses from stakeholders. Banking groups latched onto the comments as evidence the interchange provision was flawed, while merchant groups said the chairman had missed the mark.
Durbin told Bernanke in a letter that he should not be swayed by the financial industry's arguments.
"The U.S. banking industry is a $13 trillion dollar industry… [and] has always fiercely opposed any reform to the current interchange fee system," he wrote. "I urge you and the Federal Reserve to recognize these tactics for what they are, and to carry out the implementation of interchange reform as Congress intended - on the basis of facts and not the financial industry’s fictions."
Rather, he said debit card networks like Visa and Mastercard have rules requiring merchants to accept all cards within those networks, with "severe penalties" for merchants that try to pick and choose cards depending on the bank issuing them.
And he pointed out that Visa has taken steps to set up a two-tiered system to accommodate the new interchange rules as proof that dual networks are workable.
The debate on interchange has been a hot one, as banks and retailers work to sway lawmakers and regulators.
The Fed proposed rules limiting the fees in December. Its proposal, which would limit fees to seven to 12 cents per transaction, would represent a drop of 73 percent from the current 44-cent average. The Fed is due to finalize its proposal in April.