The banking industry has lashed out at President Barack Obama's criticism yesterday of Bank of America's new $5 per month debit card fee, saying that recent financial regulations pushed the bank to add the charge.
Obama said in an interview with ABC News that Bank of America's decision to charge debit card users highlights the need for the new Consumer Financial Protection Bureau.
"You can stop it because if you say to the banks, 'You don't have some inherent right just to, you know, get a certain amount of profit if your customers are being mistreated. That you have to treat them fairly and transparently,'" Obama said.
"Banks can make money," he added. "They can succeed, the old-fashioned way, by earning it."
The banking industry responded by saying that new financial regulations forced Bank of America's hand. Bank industry leaders targeted the Durbin Amendment to the Dodd-Frank Act, which requires the Federal Reserve to cap the fees that banks charge merchants for debit card transactions, for Bank of America's decision to impose a monthly fee on debit card users.
BofA's debit card fee is one of a recent slew of fees banks are charging on checking accounts, as they argue that financial regulations such as the Durbin amendment are costing them revenue. Citibank has written in letters to customers that it would charge a $20 fee for a low account balance on certain accounts; the bank also announced last month that it would charge customers $10 if their checking and savings accounts had a combined balance of less than $1,500. Wells Fargo officials also said the bank plans to start testing a $3 debit card fee this fall.
"It's disappointing and puzzling that the President would attack a private corporation for responding to government price fixing that has fundamentally altered the economics of offering a debit card," American Bankers Association President Frank Keating said in a statement. "As a direct result of the Durbin Amendment, consumers have started paying for financial services they previously enjoyed free of charge."
Richard Epstein, senior fellow at Stanford's conservative Hoover Institution, wrote in an article on Tuesday that Congress should repeal the "odious" Durbin Amendment because it harms banks' profitability and passes on costs to consumers. He wrote that the Durbin Amendment, like price controls in other industries, has created "product shortages" -- in this case, a shortage of free checking accounts and free debit cards.
A "top financial industry source" responded to Obama's comments by telling Politico, “It's like he's channeling his inner Hugo Chavez," referring to the Venezuelan communist dictator.
Sen. Dick Durbin (D-Ill.), author of the Durbin Amendment, stood his ground on Monday, holding up a debit card while addressing the Senate, according to ABC News."Bank of America customers, vote with your feet, get the heck out of that bank.... What Bank of America has done is an outrage," Durbin said. "It is hard to believe that a bank would impose such a fee on loyal customers who simply are trying to access their own money on deposit at Bank of America."