Debit-card fees draw political fire in Congress : News-Record.com : Greensboro & the Triad's most trusted source for local news and analysis

CHARLOTTE (MCT) -- Politicians have seized on Bank of America's newly announced $5 debit card fee, using it as an example of what they consider corporate greed at a time when populist anger against banks and Wall Street is on the rise.

For a second straight day, U.S. Sen. Dick Durbin, D-Ill., railed against the Charlotte-based bank and encouraged customers to switch banks. President Barack Obama, too, has said such fees constitute mistreatment of customers.

Bank of America, the largest U.S. bank by deposits, announced last week that many debit card customers would soon have to pay a $5 fee for each month the card is used. ATM withdrawals do not count.

SunTrust also has rolled out a $5 checking account fee, and Wells Fargo and JPMorgan Chase are testing $3 debit fees in some markets.

More than 125,000 people have signed an online petition at Change.org asking Bank of America to drop the $5 fee, and complaints have poured in via social media like Twitter and Facebook.

In a speech on the Senate floor Monday and in a letter to Bank of America CEO Brian Moynihan, Durbin called the new fee a choice that puts "excessive profits" over the bank's customers.

"Your decision to charge a new monthly debit fee is an overt attempt to make even more profit off the backs of your customers," Durbin wrote.

Obama has gotten in on the criticism as well. In an interview with ABC News on Monday, he described the new $5 fee as "mistreating" customers and an example of what the financial reform act is meant to curb.

"My hope is, that you're going to see a bunch of the banks, who say to themselves, 'You know what? This is actually not good business practice,' " Obama said.

The banks point to a provision in the Dodd-Frank financial reform law that limits the maximum "swipe fee" that merchants pay per transaction to 21 cents, down from an average of 44 cents. The amendment that created that limit was introduced by Durbin.

Bank of America spokeswoman Betty Riess noted that the bank lost revenue not only through Dodd-Frank but also by voluntarily discontinuing overdraft fees on debit-card purchases.

"Our new fee structure will restore a portion of that lost revenue through clear and transparent pricing, and help us to continue providing secure and efficient methods of payment for our customers that includes fraud protection and access to thousands of ATM's and millions of retailers," she said in a statement.

The American Bankers Association had sharper words in a statement from association President Frank Keating, who called the swipe fee limitation "price fixing" and blasting Obama for his "attack" on a private company.

"Unfortunately, this proves that whenever government tries to control pricing of a product or service, consumers lose," he said.

Mad Dog

October 5, 2011 - 8:51 am EDT

So the President thinks the banks are "mistreating" their customers by charging a debit card fee. I could say the same thing about lawyers, doctors, and hospitals.

Bottom line, if you don't want to pay a debit fee to BOA, Wells Fargo, Suntrust, or whomever, then select an account that opts you out or move to another financial institution. If I don't like the price I pay for a hamburger at McDonald's, then I can go to Burger King, I certainly don't need to get the governemnt involved.

BTW-Brad Miller's bill is bull.

Panacea

October 5, 2011 - 8:58 am EDT

It's expensive and time consuming to switch banks everyone time one ticks you off. I'm wrapping up closing my JP Morgan Chase account (didn't like them at all after they bought out Washington Mutual), and it's taken me quite awhile.

First I had to change my direct deposit at both my jobs, and wait a month to make sure it had gone through (since I'm paid monthly at my teaching job). Then I had to change over all the automatic withdrawals for my regular bills. Then I had to wait a month to make sure everything had cleared. Now I can finally make the phone call to close the account.

Not something I'd want to do on a regular basis.

Fortunately, credit unions don't play those games.

And your analogy to doctors, lawyers, and hospitals doesn't necessarily work. Their fees aren't hidden, you can dispute them and get them reduced, and ask upfront what those fees are. They also don't charge someone else for services rendered to you. Swipe fees went on for years under the radar, were charged to the merchants we bought from causing prices to rise over time to cover the usurious cost.

Bosco

October 5, 2011 - 9:28 am EDT

Take a look at your phone bill

terrier2003

October 5, 2011 - 9:51 am EDT

Those don't count....those are federal charges.

nemo0037

October 5, 2011 - 10:10 am EDT

I guess you missed the point about how the government regulation allows banks to charge $.22 and a bit more for every debit swipe. This regulation was fixed at that rate because it is a bit higher than the costs for processing those transaction at 80% of the banks in America. In other words, B of A IS able to make a profit from its debit card business without charging its account holders. Adding this charge to the account holders is simply an attempt to get more profits than they already expect to make. If I was in that bank's sphere of influence, I'd be looking at changing banks, regardless of any "inconvenience." I dumped Wachovia years ago, and survived the process. It's not really all that bad, and definitely worth it if you don't care to give your money to this greedy bank.

jstevenh1952

October 5, 2011 - 6:45 pm EDT

Good point!

BOA and the others will decide what their customers will or won't pay. We have the choice to decide if we will be the customer.

October 5, 2011 - 8:52 am EDT

"Bank of America spokeswoman Betty Riess noted that the bank lost revenue not only through Dodd-Frank but also by voluntarily discontinuing overdraft fees on debit-card purchases."

Ms. Riess forgets that had BoA not discontinued overdraft fees on debit card purchases (declining the transaction instead) the government would have done it for them. In fact did, that's part of Dodd-Frank IIRC.

"The American Bankers Association had sharper words in a statement from association President Frank Keating, who called the swipe fee limitation "price fixing"

Uh, no, Mr. Keating. It is not price fixing. It is preventing consumer abuse. You are charging a markup on the swipe fee that is far higher than what it actually costs you to process that transaction. It costs about 4 cents per swipe. 21 cents (the new limit) is still a 500% profit on the transaction for you, when most businesses are happy with a 20% markup on a service. What you really fear is Wall Street punishing BoA stock for not meeting growth expectations that are artificially maintained, and the potential for not making your bonus this year.

These banks got bailed out on the public's dime. That they dare complain when Congress finally at long last reigns in some of their more abuse practices is nothing short of galling. It's not going to win them any friends among the public, who are sick of the fat cats getting ahead while the rest of us still suffer the aftereffects of the recession.

October 5, 2011 - 10:25 pm EDT

Nice socialist commentary.

thinkingman

October 5, 2011 - 9:15 am EDT

An estimate in 2010 put BoA's debit-card revenues at about $3 billion.
(reference: http://money.cnn.com/2010/07/16/news/companies/bank_of_america/index.htm)

BoA made $2 billion in the first three months of 2011. Annualized, that's $8 billion.

In other words, they could literally lose 100% of their revenues from these swipe fees and still walk away with $5 billion in profits. And of course they're not actually going to lose that much. Doesn't exactly make me feel sympathetic.

As Panacea pointed out, they're making 500% profit on each debit card transaction. So what exactly is the point of a monthly fee just for using the card? At $.04/swipe, are they assuming we use debit cards 525 times per month? That's how much it would take to cost BoA $5. That's 17 times a day. And if someone did use their card that much, BoA would collect $110.25 in swipe fees ($89.25 profit). So where is this great burning need to add an extra fee? They're trying to play the victim here but it just doesn't add up.

October 5, 2011 - 9:31 am EDT

Well boohoo

southforsunshine

October 6, 2011 - 3:08 am EDT

Nice grade school commentary.

arnie

October 5, 2011 - 9:36 am EDT

Just more greed by the same banks who are pissed that they cannot be bailed out again. The estimated earnings by BOA on these new fees is around 6.6 billion.........................

October 5, 2011 - 9:52 am EDT

I don't think they need to be bailed out. They did pay back all their bailout money well ahead of timelines and the american taxpayer made about 4 billion off the deal. not too shabby.

October 5, 2011 - 9:54 am EDT

So since the merchants debit card fee per transaction was just cut in half, does this mean that I should see a small reduction for the consumer price of goods? It would make sense that if the merchants are saving money on this that our prices should decline, right?

October 5, 2011 - 11:09 am EDT

That would be true if prices hadn't risen anyway due to other factors like cost of materials and fuel.

But yes, theoretically, merchants ought to be able to ease off prices or at least hold off on increases.

Or maybe use the profits to hire.

rainmaker6601

October 5, 2011 - 11:33 am EDT

This is typical of democrats. They (in particular Dick Durbin) were responsible for this. Republicans warned this would happen but democrats pushed through these regulations. Now they are outraged? Sorry, but this is what happens anytime Congress intervenes.

Bilbo

October 5, 2011 - 11:58 am EDT

..so then..I take that you are in favor of the banks ripping the American consumer off..and further padding the pockets of the most wealthy in this country....how very Republican of YOU!!!.....

October 5, 2011 - 12:08 pm EDT

Yes, Republicans warned that this would happen. But there's no reason it should have happened. The banks don't need these fees to continue making profits. The numbers don't support the claims that this is a natural product of the new regulations, or that any of this is necessary for the banks' survival. Republicans like to say that "banks (and other businesses) have to profit in order to survie", which is a true but misleading statement. Bank of America will profit with or without this fee, despite the changes to the swipe fees, and they'll profit by huge margins. Just not a huge enough margin to satisfy their greed.

pragmatist

October 5, 2011 - 11:38 am EDT

I'm going to send Bank of America a letter:

"Dear Bank of America,

To avoid the inconvenience and cost to your bank of losing my checking and savings account deposits, plus the potential of my re-financing my Bank of America mortgage with a competing bank, please remit ten dollars (US) per month to my checking account to cover the expenses you have recently imposed on my accounts.

Yours sincerely,

A "Valued" Bank of America Customer

MH492

October 5, 2011 - 11:50 am EDT

It is sad that the banks for years made money hand over fist in overdraft fees. During this time they also made ill-advised loans, nearly came to financial collapse and without the taxpayer bailout, many more would have failed. The banks are still reeling from the low interest rates, poor performing mortgage loans, underwater bank owned property, legally reduced allowable overdraft fees. Guess what! The american people are also rough out this recession. But what do they see it as, "reduced revenue."All of this is reducing their revenue so they are scratching and clawing at everything to find more "revenue" to prop up stock prices including sticking it to the very customers (taxpayers) that bailed them out in their greatest time of need! Banker's memories are far more short-term than mine! I will not be nickeled and dimed by a bank and will leave them quicker than I can walk into the next bank.

HotRodLincoln

October 5, 2011 - 12:47 pm EDT

This is easy, BoA can charge what ever they like for their services. If the customers don't like it they can find another bank, I did.

retiree

October 5, 2011 - 1:49 pm EDT

You're right, but the political left in this country wants the government to pass laws that benefits them even at the expense of the employers who employ them. As the old saying goes, a government powerful enough to give you want you want is also powerful enough to take what you have. Maybe is government motors (GM) stays the way it is now we'll all have those electric vehicles since the competition over models, styles, etc will be a thing of the past . . all thanks to government intervention. How many times have we all heard about a situation and the common response is "there ought to be a law" against this or that. We've lost our ability to think for ourselves and make our own decisions and want to reply on others in government to make them for us.

October 5, 2011 - 2:07 pm EDT

None of which has anything to do with a large corporation ripping people off.

HotRodLincoln is only partially right. Yes, you can move your account . . . assuming you have somewhere to move it to.

If the banking industry adopts policies like this nation wide, then consumers may have no choices at all other than to go back to stuffing money in a mattress. JP Morgan Chase and Wells Fargo are testing these same fees in selected areas to see what consumers do.

Just because the banks can do something doesn't mean they should or that it is right, moral, or ethical. It also doesn't mean the government shouldn't step in to stop it.

October 5, 2011 - 3:05 pm EDT

Retiree is also making a point about laissez-faire capitalism, advocating for reduced government intervention. In theory, competition controls the market to the advantage of the consumer...the providers have to compete in order to attract consumers, and this drives prices down. In practice, large corporations control access to goods and services so tightly that they artificially restrict demand, driving prices upwards for the consumer. Like panacea said, consumers could change banks but if all banks have the same basic practices, it creates the illusion of choice and competition with the practical effect of a monopoly, giving the banks the freedom to raise prices with impunity.

The only real "price-fixing" going on is at the hands of the corporations. Oil companies work the same way.

October 5, 2011 - 9:51 pm EDT

Then she needs to start her own bank. Just get some investors together and offer them a profit potential (yes, I know . . . . . oh the horror of profits), and then she may be able to offer her services in a bank that is more friendly, and probably less profitable . . . . and eventually competition will cause her bank to fail . . . unless of course it is a government bank.

whyus

October 5, 2011 - 2:35 pm EDT

These new fees are exactly what Congress was told would happen if they stuck there unintelligent noses in the banking business. They inacted the CARD Act which took away bank's ability to charge an interest rate based on a person's credit worthiness so banks have to make up that difference elsewhere. Then Durbin comes along and regulates the fees banks can earn on discount revenue, giving into the whims of Walmart and other big box retailers. So, pick your poison.

October 5, 2011 - 3:08 pm EDT

Again, make up what difference? Look at the numbers yourself and tell me how BoA is suffering as a result of this? They're continuing to make exorbitant profits even in the face of increased regulation, and will only expand that further with these fees. The defenders of these giant corporations make it sound like the banks are about to go broke because of regulation that protects consumers, and it's factually not true.

October 5, 2011 - 9:56 pm EDT

Just what is exorbitant? Is a baseball player who hits 300 and is paid $20 million a year exorbitant? Is an artist who sells paintings for $1,000,000 a piece exorbitant? Who defines it and how did they get their right to do so? Sounds like socialism or communism to me.

I say the ballplayer should get paid what the market offers him, even if it $100 million or more a year and movie stars should get paid what they can get from the producers . . .the sky is the limit. My income is no where close to those figures, but I'm not mad those people make the income they make.

October 5, 2011 - 10:23 pm EDT

Ahhhhh.....free banking. I believe it is part of our Constitution somewhere just before our right to cheap gas.

Come on people. Think about your premises a little more carefully.

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