Lower swipe fee cap could hit banks

It feels like it's been forever since we've heard much about debit card swipe fees -- those transaction fees banks charge retailers when customers pay with plastic.

But after two years of legal wrangling, a federal judge in Washington on Wednesday invalidated the cap regulators placed on them as part of the Dodd Frank financial reform law in 2011, saying the cap was set too high.

It's a major victory for retailers, who sued over where the cap was set: an average of about 24 cents per swipe. Before the cap, transactions cost around 44 cents.

But should the Federal Reserve have to come up up with a new, lower, cap -- as the ruling implies -- it will certainly further crimp bank revenue.

Bank of America had already estimated the debit card fee cap would cost the Charlotte bank $2 billion per year. The bank's most recent annual report says Bank of America's interchange revenue was down $1.7 billion in 2012 over the year before, on top of the $430 million reduction in the last quarter of 2011.

Wells Fargo reported giving up $365 million in revenue the first quarter after the cap went into effect.

Both Bank of America and Wells declined to comment.

Here's what the American Bankers Association has to say: "We’re deeply disappointed in today’s court decision, which will harm banks of all sizes and make it more difficult for institutions to serve their customers. ... It was – and still is – all about trying to help retailers increase profit margins while providing no real benefit to consumers. All this as retailers continue to enjoy the benefits of debit cards – from faster checkout to lower fraud costs – without paying for it or keeping their promises to U.S. consumers."