Bank of America drops debit card fee
Despite an outpouring of complaints online and at branch offices, the bank had remained steadfast in its plans until last Friday, according to a person briefed on the situation, planning to ease just some of the conditions for avoiding the fee. But over the weekend, after two major competitors — Wells Fargo and the nation’s largest bank, JPMorgan Chase — said they were backing away from their plans to levy similar charges, two high-ranking Bank of America officers recommended to Brian Moynihan, the bank’s chief executive, that the bank simply drop the fee.
Then, on Monday morning, when SunTrust, a regional bank in Atlanta, said that it, too, would abandon its $5 charge, Bank of America was left standing alone, the last major bank planning the fee. The announcement came on Tuesday.
“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, co-chief operating officer at Bank of America, said in a statement. “As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”
The revenue the bank expected to raise from the debit fee was not worth the damage to its reputation, the person briefed on the matter said.
The bank never disclosed how many of its customers would have been affected by the fee. It also declined on Tuesday to comment on how many had closed their accounts after the original announcement, but sources close to the bank said that account closures were higher than usual. And smaller institutions like PerkStreet said that their account acquisition rate had spiked in the days afterward.
Besides Wells Fargo, JPMorgan Chase and SunTrust, Regions Financial has also said it would roll back its debit fee as of Tuesday and reimburse customers for any charges incurred.
All along, though, Bank of America took the brunt of the criticism, and apparently, it was not just the debit fee that caused consumers to lash out. For Grace Anderson, of Madison, Wis., the bank’s recent decision to cut 30,000 job positions had prompted her to close a checking account. “I cannot in good conscience invite them into my house and my life,” she said, adding that she had moved her account to USAA, a federal savings bank.
The new fees were part of an effort by the banks to raise revenue lost elsewhere. On Oct. 1, a new federal rule went into effect that limits the fees banks can levy on merchants every time a consumer swipes a debit card to make a purchase. The new limit is expected to cost the banks about $6.6 billion in revenue a year, beginning in 2012, according to Javelin Strategy and Research. That comes on top of another loss, of $5.6 billion, from new rules restricting overdraft fees, which were widely seen as onerous and went into effect in July 2010.
Now that all the large banks have decided not to impose the debit fee, experts said, they will find other ways to fill the hole. “Those revenues paid for a lot of things,” said Joe Gillen, chief executive of Pinnacle Financial Strategies, a bank consultant in Houston.
Now, he said, consumers can expect more fees over time. “It will be slow and gradual, but they will bring those revenues back,” Mr. Gillen said.
What he said was most frustrating, however, was that the banks were penalized for their openness. The fees the banks were trying to replace — the so-called swipe fees — were not readily apparent, even though all consumers were ultimately paying them in higher costs at the cash register. Now, Mr. Gillen said, the banks “are going to have to hide the fees and the customers will still have to pay them.”
But those customers may have found their voice, which has been amplified by social media. “People can now use tools like Change.org, Facebook and Twitter to rapidly organize and collectively act to influence the policies of even the largest companies,” said Ben Rattray, founder of Change.org, which allows consumers to start grass-roots campaigns using its online platform.
He pointed to Molly Katchpole, a 22-year-old woman from Washington who collected more than 300,000 signatures opposing the fee by using his company’s platform. And then there is the grass-roots effort that is calling for this coming Saturday to be “Bank Transfer Day,” where customers of big banks move their accounts to community banks and credit unions.
Mr. Rattray and other consumer advocates said the outcry was about much more than fees. “Bank of America’s new debit card fee was the last straw for many consumers who are tired of banks that got bailed out that are now turning around and hiking fees,” said Norma Garcia, manager of Consumer Union’s financial services program. “There was this phenomenon with banks and others confusing passivity with loyalty. And consumers are saying, ‘You can’t take us for granted anymore.’ ”
Lawmakers also openly criticized Bank of America’s planned fee. Days after the bank announced that it would charge the fee, President Obama said customers should not be “mistreated” in pursuit of profit, while Vice President Joseph R. Biden Jr. called the move “incredibly tone deaf.” And Senator Richard J. Durbin of Illinois, the No. 2 Senate Democrat, spoke out on the Senate floor, urging consumers to vote with their feet. He had sponsored the rule, known as the Durbin amendment, that limited the amount banks could charge for debit card transactions.
On Tuesday, he took to the floor again. “What we have at work here is a very fundamental principle of our economy, the free market economy, transparency,” he said. “So people know what they are being charged. So they have a choice.”
Source: nytimes