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Bank of America drops plan to charge debit card holders
Question of the Day
The retreat on debit card fees became total Tuesday, when Bank of America waved a white flag at the onslaught of customer outrage and surrendered its plan to charge account holders $5 per month for the cards.
Bank of America, the nation's second-largest bank, sparked the high-profile controversy a month ago by becoming the first institution to announce plans to charge for debit cards, starting in January. Several major banks quickly followed suit, acting in response to federal regulations.
"We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit-usage fee," said David Darnell, Bank of America's co-chief operating officer. "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 move put Bank of America in the company of such major banks as JPMorgan Chase & Co., Wells Fargo & Co., SunTrust Banks, and Regions Financial in rescinding the new debit card fees.
Banks warned of new fees like this for months as Congress pushed through a banking regulation law that included an amendment pushed by Senate Democratic Whip Richard J. Durbin of Illinois that limits the "swipe fee" banks can charge retailers when customers pay with their debit cards.
Mr. Durbin took to the Senate floor Tuesday to call the Bank of America reversal a victory for the free market and for transparency.
"It's an indication to me that consumers have a much larger say in this process than they did just a few weeks ago," he said.
The rule went into effect Oct. 1, and caps "swipe fees" at 21 cents, a sharp cut from the average 44 cents banks had been charging. To make up for the lost revenue, banks said they would have to charge new debit card and checking account fees, raise existing levies and cancel rewards programs, among other things.
But consumers revolted. On Saturday, thousands planned to switch to smaller banks that don't charge the same fees during "Bank Transfer Day." Banks got the message, and one by one they began backing down.
Bank of America had already backpedaled from the fee once, saying it would provide ways for customers to avoid the cost, such as using direct deposit and maintaining a minimum balance. Now, it is completely abandoning the program.
One industry analyst compared the industrywide retreat to home-video behemoth Netflix reversing itself about a decision to split its two main delivery services - Web streaming and mail delivery - as a way to charge customers more.
"This is Bank of America's Netflix moment," Mark Schwanhausser, a banking analyst with Javelin Strategy & Research, told reporters. "It misjudged what consumers would bear. It was the wrong fee at the wrong time."
And since debit cards are not credit cards and only provide instant access to money in checking and/or savings accounts, he explained, consumers felt especially resentful about having to pay for use of their own funds.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at email@example.com.
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