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New Debit Card Rules Put Vending Industry On Alert; Dodd-Frank Reform Raises Small-Transaction Fees

Posted On: 10/3/2011

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CHICAGO -- The National Automatic Merchandising Association warned today that the Dodd-Frank financial reform legislation, specifically its new rules on debit card fees, will deliver a damaging blow to the vending industry. As a result, NAMA is calling on its membership to contact members of Congress about the legislation's negative impact on the vending, announced Dan Mathews, the association's chief operating officer.

On Oct. 1, a cap on the fees banks can charge retailers every time customers swipe their debit cards went into effect. The new rules limit the amount banks will be able to get from merchants. Where as banks used to charge an average fee of 44¢, they can now charge a maximum of only 21¢. However, this 45% drop in fees is expected to cost the banking industry billions of dollars and, as a result, consumers and merchants will now face new charges as banks try to recover losses. | SEE STORY

"Although this will be beneficial for large-ticket transactions," Mathews said, "there is an adverse impact on the vending industry due to our typical small-ticket transactions. This new cap could as much as triple the net swipe fee for small transactions."

Gateway provider contracts vary from operator to operator, the NAMA chief pointed out, and therefore the impact of the new rules on rates will vary.

"Card companies and banks now have the option to charge up to 21¢ per transaction plus an additional 0.05% of the transaction to mitigate fraud losses and 1¢ for fraud protection," explained Mathews, who is urging vending operators to contact their cashless service providers to find out how the new rate caps will affect their businesses. "The situation is changing every day."

NAMA has recommended several steps for vending operators to take. | SEE NEWS RELEASE

"We're looking at different options to see how we can lessen or eliminate the adverse impact of the new debit card swipe fee cap," Mathews said. This includes lobbying members of the House Committee on Small Business, mobilizing a grassroots effort to educate politicians about the unintended consequences of the debit card rule and using "action alerts" to provide NAMA members with appropriate talking points when speaking to elected officials.

(The House Committee on Small Business, by the way, has just launched a Web page -- Small Biz Open Mic -- that allows small business owners to communicate directly with congressional staffers about how policy affects their businesses. The page also offers them the opportunity to propose questions for future committee hearing witnesses.)

Additionally, Mathews said that NAMA is "directly and indirectly" negotiating with Visa and MasterCard. Visa, the world's largest consumer-payment network, and No. 2 MasterCard are likely to increase their fees from 8¢ on a $2 purchase to 23¢. So if the average cashless transaction at a vending machine is $1.67, which one provider claims, then the cost of a transaction with a regulated debit card will rise by 247%. And vending machine payment-processors are highly dependent on debit cards.

The new rates affecting small tickets are one attempt by Visa and MasterCard to shore up the interchange income of big debit card issuers now subject to price regulation by the Federal Reserve as a result of the Durbin Amendment in 2010's Dodd-Frank Act.

"Our members can be sure that we'll be taking every step possible to protect them from this heavy new burden imposed on them by this legislation," Mathews said. "We'll be in touch to ensure our members are up to date, but be sure to check our new link we're developing on the NAMA website for more up-to-date information."

USA Technologies and Apriva, two of the largest providers of wireless cashless vending services, have been contacted for this story. Both companies are expected to issue statements. USAT reportedly connects 119,000 vending machines and other unattended locations with for more than 1,000 clients that accept credit and debit card payments wirelessly through its ePort card readers and related technology.