Merchants continue push for higher fee limits

A letter sent to every member of the House and Senate by the Merchants Payments Coalition argues the fee proposal will help bring debit cards in line with paper checks, which have no fees tied to them. The letter also says the Fed's regulations will lead to lower costs for consumers as retailers pass on their fee savings.

A separate letter from the Retail Industry Leaders Association contends that the proposal slashing fees is a good first step, but that the fees should still be dramatically lower.

In the letter, the group contends that if the Fed wants to limit fees so they cover the actual costs of processing a debit transaction, the fees should be a fraction of what is currently proposed. A transaction where the card holder has to provide his or her signature should cost just 1.36 cents per transaction, while one where the purchaser punches in his or her PIN should cost just 0.33 cents per transaction.

The Fed proposed rules Dec. 16 that would limit the fees a bank could charge to between seven and 12 cents per transaction — a 73 percent drop from the current average of 44 cents per deal, according to the central bank. The Fed reached that range after surveying debit card issuers about what they charge for transactions.

The rules implement a late entry into the Dodd-Frank reform act, dubbed the Durbin amendment because it was primarily backed by Sen. Dick DurbinDick DurbinLawmakers push one-week stopgap funding bill Rob Thomas: Anti-Trump celebs have become 'white noise' Overnight Energy: Lawmakers work toward deal on miners’ benefits MORE (D-Ill.).

The banking industry has blasted the provision and the rules as an unfair and arbitrary restriction on private market practices, and one that will cost them billions in revenue, which they say will have to be recouped by new fees or reduced benefits to account holders.

And bankers have gotten some backing from lawmakers. A bipartisan group of 13 senators warned the Fed ahead of the rulemaking that onerous rules could amount to "price-fixing," while one of the bill's main architects, Rep. Barney Frank (D-Mass.), informed the Fed in a letter that it needs to "exercise care" in drafting the rules. Retiring Sen. Chris Dodd (D-Conn.) has said the Fed's proposal might be "overreaching."

Any pushback against the rules is now being met with an equal push from retail groups, which claim they are facing a "blizzard of misdirection" from banking groups, and that the proposed rules finally take the first, but hopefully not last, step in fixing a "broken" debit card system.