Just a few months ago, it seemed regulators would surely slash the fees banks charge merchants when they accept debit cards.
But in the courts and Congress, the banks are trying hard to scuttle the fee cuts.
RETAILERS COMPLAIN OF MONOPOLY
Most consumers don't seem to know much about this fee fight between banks and retailers.
Nahte Amamingo of Shoreview knows his bank gets some money when he buys something with his debit card.
"My understanding is that there's a fee," he said at Rosedale Shopping Center. "But the amount, the percentage, I'm not aware of."
Retailers lament that banks and their payment network partners generally get between 1 to 2 percent of every transaction on a debit card. Merchants say that amounts to some $20 billion a year.
Debit cards look like credit cards, but are tied a consumer's bank account. When a consumer buys something with a debit card, money is taken from the consumer's bank account, usually within a day.
Retailers also pay fees when they accept credit cards. But at this point, there's no move to limit those charges.
Retailers contend banks and their payment system partners have long used monopoly power to keep fees high.
Merchants rejoiced when the Federal Reserve proposed cutting debit card fees to a maximum of 12 cents per transaction. The average fee now is about 44 cents. The cap was slated to go into effect this summer.
BANKS HIT FED, CONGRESS
But banks and their payment network partners have been busy bending the ears of Congressional representatives, trying to delay or kill the fee cut which they figure could cost them $14 billion a year.
Even some Federal Reserve Board members have signaled they think the issue needs more study to assess the impact on banks and the extent to which retailers would pass on their savings to consumers in the form of lower prices.
"This is a system that wasn't broken and the government has put themselves in the middle of a very successful payment system," said Jason Korstange, a spokesman for TCF Bank.
TCF has sued the Fed, arguing that capping debit card fees is unconstitutional. The case is making its way through the courts.
"We have a product that we've sold and they're telling us we can't make a profit on that," Korstange argued.
TCF figures the proposed fees cuts would cost it about $80 million a year.
TCF, US Bank, Wells Fargo and other banks contend cutting their debit card fee revenue would not only be unfair but would also harm consumers.
"Banks have said they'd no longer offer these cards as a free service, that they would charge just for carrying the card," said Joe Witt, president of the Minnesota Bankers Association. "Other banks have said they would no longer offer a free checking product."
Some banks have already said they'll end reward programs for debit cards.
The warnings are scaring some people and winning bankers support from non-traditional allies, such as the National Education Association and the NAACP.
NAACP Senior Vice President for Advocacy and Policy Hilary Shelton wrote the Fed to ask that the fee cut be "thoroughly and expeditiously reviewed prior to implementation to ensure that it will not raise fees or otherwise harm at-risk communities, including communities of color."
Meanwhile, a bipartisan group of U.S. senators is pushing legislation to study the banks' complaints and delay the fee cut.
CONSUMER ADVOCATES SPEAK OUT
While that would please bankers, consumer advocates say it wouldn't benefit the public. They say Congress should see there's no way banks have consumers' interests at heart.
"It's ludicrous to any consumer advocate to think the banks want to protect customers," said Ed Mierzwinski, a consumer advocate at the U.S. Public Interest Research Group. "They want to protect a monopoly that they've had for many, many years is all they want."
Minnesota retailers agree.
Brian Steinhoff, president of the Minnesota Retailers Association, said the fees are excessive and onerous.
"Ask any retailer — small, big, medium — the second biggest cost that goes into the business more often than not, it's these swipe fees.," Steinhoff said.
With billions of dollars at stake, the squabble between retailers and banks over debit card fees promises to drag on for months, if not years.
(The Associated Press contributed to this report.)