Salon owners and product retailers should begin to get a break from debit card transaction fees starting July 21, 2011, according to a statement from the Federal Reserve. The legislation, which was passed last July in the Dodd-Frank Wall Street Reform and Consumer Protection Act, was challenged in March at the U.S. Senate. The attempt to delay the law, however, was narrowly voted down on June 8 by one vote and will take effect as originally mandated.
The financial reform will reduce debit card transaction fees banks are allowed to pass on to retailers by 80%. Banks make substantial profits from these fees, which racked up $20.5 billion last year, according to research firm Nilson Report.
Currently, debit card issuers are allowed to charge 44 cents per transaction. The Consumer Protection Act will decrease this fee to an average of seven to 12 cents for each transaction with a cap at 12. Set by the Federal Reserve, the new fees must remain “reasonable and proportional” to the cost of a transaction, the bill says.
The Professional Beauty Association (PBA) and its members helped to ensure the enactment of the law through a grassroots campaign, which posted on its website June 9 a “big thank you” to all of those who signed letters of support that were sent to Congress. “Another win!” the article says. “Business owners that accept debit cards as a form of payment from customers and clients can celebrate a victory.”
PBA also joined in with retailers and other organizations in a coalition effort to make sure the bill stayed the same. “PBA is pleased with the Senate vote yesterday [June 8] and is encouraged by the position Congress has taken in support of these reforms,” says Myra Y. Irizarry, PBA government affairs representative.
The fee limit applies to banks with more than $10 billion in assets. Legislators agreed that smaller issuers — banks that have fewer than $10 billion in assets — will be exempt from the law, since the revenue from these fees accounts for a large amount of their income.
Large banks implemented a considerable amount of lobbying since the Consumer Protection Act of 2010 was passed, which could explain why only five out of the nine legislators who proposed the delay opposed the law last year.
The bill that would have delayed the debit fee law called for a yearlong study and a two-year suspension on the fee reduction.