The Federal Reserve released its final rule on interchange fees for debit cards, the fee that merchants pay banks for processing the transaction. The Wall Street reform law required that the Fed make sure the fee was “reasonable and proportional” to the processing cost.

The Fed late last year proposed setting the fee at no more than 12 cents per transaction, a significant cut since banks were earning about 44 cents per transaction. Merchants were ecstatic. Banks upset.

But today the Fed disclosed its final decision: 21 cents plus 0.05 percent on each transaction.

“The announcement today from the Federal Reserve is a disappointment to merchants and consumers who face unfair and excessive fees imposed by big banks and credit card companies,” said Sandy Kennedy, president of the Retail Industry Leaders Association in a prepared statement. “The Federal Reserve’s about-face suggests it abandoned the facts that the Board embraced in the December proposed rules, instead ceding to the wishes of the big banks and credit card companies.”

American Bankers Association president Frank Keating notes it could have been worse. But adds:

“The final rule still represents a 45 percent loss in revenue that banks use to provide low-cost accounts to our customers, fight fraud and maintain our efficient U.S. payments system. This remains a real concern to banks everywhere and the consumers and communities they serve. Consumers will still feel the impact of this direct transfer of costs from big box retailers to everyday Americans. Consumers will see higher fees for basic banking services, and banks – particularly community banks – will still feel the revenue pressures that this rule will cause.”

The new rule kicks in October.