The Federal Reserve will not meet an April 21 deadline for issuing a final rule cracking down on the fees banks charge merchants when a debit card is used, Fed Chairman Ben Bernanke said in a letter to U.S. lawmakers on Tuesday.

The reduction in fees is required under the Dodd-Frank financial reform law.

Bernanke said the Fed needs more time to analyze the more than 11,000 comment letters it received, but is committed to having a final rule in place by July 21 when the limit is supposed to go into effect.

The short delay could prove a reprieve for banks and card companies if they can use it to convince Congress that a longer delay is needed to study the rule, or a change to the law is needed.

It's a win for the banks and the various entities that were trying to introduce changes in the law, said Tom Layman, a former chief economist for Visa who now runs the payments consulting firm Global Vision Group.

Bank industry groups were quick to renew their calls for further study of the law.

Congress should immediately delay the effective date of the Durbin amendment and initiate a study to fully examine the consequences on consumers and the marketplace, Richard Hunt, president of the Consumer Bankers Association, said in a statement.

But retailer and merchant groups seized on Bernanke's comment that the Fed is committed to having a rule out by July 21 as evidence the proposal will soon be a reality.

Senator Richard Durbin is the author of the fee crackdown, and has fiercely opposed legislative proposals to delay the crackdown.

The Fed in December proposed capping the fees at about 12 cents per transaction -- a 75 percent cut.

Bank of America Corp, the largest U.S. bank, has said the cap could cost it as much as $2.3 billion in fee revenues annually. BofA declined to comment on the Bernanke letter on Tuesday.

At the Fed's proposed level, the cap would cost the bank industry about $13 billion in annual revenue, has said.

Banks and card network companies such as Visa and MasterCard have loudly complained the proposed limit is far too strict and are pitted against merchants and retailers in what has been a fierce lobbying brawl.


The law envisions giving banks and retailers three months to digest and implement the Fed rule. That timeframe could be greatly condensed if Congress does not act to move the effective date back from July 21, which could make it more difficult to implement the rule.

Implementation takes time and money, Layman said. There needs to be some time frame between implementation and the ability for (the industry) to be able to support it operationally.

Bernanke wrote, The issues raised by the comments are complex and difficult and are significant to the payments system, its providers, and its users,

The Fed has heard from businesses of all sizes on the rule. Big banks such as Wells Fargo and mega-merchants such as Wal-Mart Stores Inc have weighed in, as well as small businesses such as Amish Country Originals of Snohomish, Washington, and Pair-A-Dice Games of Vista, California.

Democratic Senator Jon Tester has introduced legislation that would delay the crackdown for two years while the issue is studied further.

Durbin has argued a delay is simply a tactic to buy time for a repeal.

House Republicans have also introduced a bill to delay the rule but what the Senate does is the key issue.

Durbin, the number two Democrat in the 100-seat Senate, remains a formidable roadblock to getting a delay into law and 60 votes will likely be needed to get around his objections.

(Reporting by Dave Clarke in Washington and Joe Rauch in Charlotte; Additional reporting by Maria Aspan in New York; Editing by Andre Grenon, Tim Dobbyn, Gary Hill)