Bank Of America Dropping Plan To Charge Monthly $5 Debit Card Fee
WASHINGTON -- Bank of America has abandoned plans to begin charging debit card holders five dollars a month to use their cards, a proposal which drew intense consumer and political backlash since announced in late September.
"We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee," Bank of America co-COO David Darnell said in a written statement. "Our customers' voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so."
The proposed BofA fees have been a common complaint from Occupy Wall Street protesters, who have increased public attention to unsavory practices at several big banks.
The company's move may bring the closing chapter to a public relations campaign from major U.S. banks that has lasted more than a year, during which financial titans insisted that last year's Wall Street reform bill had made debit cards unprofitable for banks, forcing them to charge new monthly fees.
After Congress required the Federal Reserve to crack down on the fees retailers pay banks to accept plastic, banks insisted the rules would leave them with no choice but to impose new charges on consumers. When BofA rolled out its new debit card fee, the company's spokespeople portrayed the move as part of an inevitable industry-wide response to the fee limits that was dictated by basic economics.
"This is not just a question for us, it's for all banks," BofA spokesperson Ann Pace told HuffPost in late September. "The price of a debit card was previously determined by the amount and type of transactions. We were able to pass some of these costs along to merchants, but because of regulatory changes, we are adjusting our pricing to reflect today’s economics."
Bank of America CEO Brian Moynihan also defended the fee in October, saying that the bank "has a right to make a profit." But retreating from the fee will likely help the bank keep customers. One-third of consumers said they would leave their bank if it started charging a debit card fee.
A month later BofA and other banks seem to have rethought those economics.
Other major banks that had been planning new debit fees, including Citigroup and Wells Fargo, have also abandoned their plans. And just hours before BofA's announcement, two of the country's largest banks, SunTrust Banks and Regions Financial Corporation, announced that they would be dropping their fees for debit-card purchases. BofA did not immediately respond to questions about how the economic basis of the proposed policy had changed.
After Bank of America announced the fee, critics took to Twitter to deride the bank. President Barack Obama also criticized the fee saying in an interview with ABC News that banks don't have a right to mistreat their customers. The proposed BofA fees have been a common complaint from Occupy Wall Street protesters.
They also drew congressional derision.
After BofA announced the fees, Rep. Brad Miller (D-N.C.) introduced legislation urging consumers to move their deposits from BofA to smaller, more consumer-friendly institutions.
Miller's move, not surprisingly, prompted outrage from big banks. "Great, now we have a member of Congress encouraging a run on a major U.S. bank," one bank lobbyist, who spoke on the condition of anonymity, said at the time.
Responding to BofA's announcement that it would no longer seek to charge the fees, Miller told HuffPost: "This is great news, but I'm not going to hang a "Mission Accomplished" banner. The very fact the banks just up and announced the fees shows we need real competition in consumer banking."
Dick Durbin (D-Ill.), who originally proposed the swipe fee limits on banks, was more upbeat on the news.
"I'm not taking a victory lap, because there's a lot more to be done," Durbin told HuffPost. "But it's a clean sweep. All the banks have walked away from debit card fees. Thank goodness they were listening to their customers. And thank goodness there was enough transparency about these fees for the first time, that customers were able to make a choice and they've made a choice.
Consumers have "started to move in large numbers to community banks and credit unions, where they feel they're treated better," Durbin continued. "If they try to backdoor these fees in some kind of interest rates or whatever it might be, I don't think consumers are going to fall for it."
Merchants have long claimed the fees banks charge retailers for the privilege of accepting plastic are exorbitant, noting that electronic debit card swipes are cheaper to process than paper checks, and that banks didn't charge them debit fees for several years.
When banks first introduced debit cards -- which allow consumers to withdraw funds electronically, saving financial institutions significant cash -- they came free of any fees. But over time, banks began slapping merchants with a variety of charges. Last year's Wall Street reform legislation required the Federal Reserve to crack down on those fees, which averaged 44 cents per swipe. In December, the central bank proposed new rules that would have limited fees to 11 cents per swipe.
And after a heated battle in Congress, the Senate narrowly rejected a push to repeal those limits, but the Fed came to the banking industry's aid shortly afterwards, revising its regulations to allow banks to charge up to 24 cents per swipe, on average.
BofA's now-abandoned fee would only have applied to debit card swipes; paper-check processing would still have been provided for free.