The Federal Reserve will miss the April 21 deadline for finalizing rules on new limits on debit card fees, Fed Chairman Ben Bernanke has told lawmakers.
In a letter sent Tuesday to House Financial Services Committee Chairman Spencer Bachus (R-Ala.) and ranking member Rep. Barney Frank (D-Mass.), Bernanke said the central bank would not be able to meet the statutory deadline.
Instead, Bernanke said the Fed hopes to finalize the rules by July 21, when that provision of the law goes into effect.
"I want to assure you that we are devoting substantial resources to these efforts to ensure that we give the issues the careful consideration they deserve," he said.
Delaying the implementation of the provision after being deluged by public comments is the latest evidence of the fierce ongoing battle over the so-called Durbin amendment.
The measure, backed primarily by Sen. Dick Durbin (D-Ill.), has pitted banks and retailers against each other for months, as the new limits mandated by the provision would affect billions in revenue, to the benefit of retailers and the loss of banks.
Under the provision, the Fed is required to establish limits on debit card fees that are "reasonable and proportional" to the cost of a debit card transaction. Under proposed rules released in December, the Fed would slash fees to 7 to 12 cents per transaction, as compared to current 44-cent average.
The proposed cap has driven banks to warn that they will have to eliminate debit card rewards programs and assess new fees on consumers to make up for the lost revenue, which is estimated to total $1 billion a year.
It has also driven some lawmakers to propose legislation that would delay the new limits for up to two years as the matter is further studied.
Retailers said the Fed delay is evidence it is taking the matter seriously and should not be altered.
"Chairman Bernanke’s letter is proof-positive that the Federal Reserve is approaching this rulemaking thoughtfully," said Brian Dodge, the senior vice president for the Retail Industry Leaders Association. "Congress should not step in and interfere or pre-judge what is clearly a thorough fact-based process."
However, financial institutions read the letter differently.
"The Fed’s admission that it cannot meet the deadline imposed on it by Congress is further proof that Congress must take action now to postpone this entire matter," said Bill Cheney, president and chief executive officer of the Credit Union National Association.