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Sniping at Charges for Swiping Debit Cards

Both sides balk at a compromise on fees that merchants pay banks

Jennifer Cavallaro’s day job is owner of a restaurant in Bristol, R.I. Over the past year she has moonlighted as an amateur lobbyist. She’s one of a small army of business owners who helped beat Wall Street in a fight to reduce the fees banks charge retailers for accepting debit cards, a development that promised to deliver big savings for her Beehive Café—until the Federal Reserve stepped in.

In December, the Federal Reserve Board, asked by Congress to determine an appropriate fee, proposed limiting payments to 12¢ per transaction. That sparked an outcry from banks, which said the move would mean an end to such perks as free checking and rewards programs. Then on June 29, after being flooded with more than 11,000 comments on the plan and meeting with scores of companies and interest groups, the Fed issued its final ruling: a cap of 21¢ per transaction, effective Oct. 1. Although still lower than the average 44¢ retailers now pay, the decision will preserve billions of dollars in revenue for banks. “I hate to sound like a conspiracy theorist, but what happened in between?” Cavallaro says. “This was definitely a surprise.”