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SunTrust joins list of banks rescinding fees for debit cards

‘We’ve listened to our clients’ feedback’

- The Washington Times - Monday, October 31, 2011

On Monday, SunTrust Banks became the latest financial institution to stop charging for debit cards, making the move after the new fees proved wildly unpopular with customers.

The bank, which began charging $5 a month for debit cards in June, promised Monday to cancel the fee and return all the money it has collected from customers.

"We believe banking is a relationship business and recognize the importance of responding to client preferences," said Brad Dinsmore, consumer banking and private wealth management executive at SunTrust. "We've listened to our clients' feedback and will provide the convenience and security of check cards at no additional charge as part of all of our checking accounts."

SunTrust joins JPMorgan Chase & Co., Wells Fargo & Co., and Bank of America Corp. in backpedaling from earlier plans to respond to government regulations by creating a new revenue source through debit-card fees.

"We knew when we had to increase the fees that it would not be popular," said Richard Hunt, president of the Consumer Bankers Association. "We had millions of Americans never paying a fee in the first place. Americans are just not accustomed to paying for a checking account or debit cards. There's a generation of Americans who have never done that."

Chase tested out a $3 monthly fee in Wisconsin and Georgia, but it said last week the program will end in November and not be expanded to the rest of the country. Wells Fargo has also ended a short-lived, five-state test of charging $3 monthly fees starting Oct. 14.

Bank of America, which made a splash a month ago when it announced a new $5 monthly fee for debit cards, has not backed off but says there will be ways for customers to avoid the fees, such as using direct deposit and maintaining a minimum balance.

Banks warned of new fees like this for months as Congress pushed through a banking regulation law which 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.

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.

"Make no mistake about it: We would never have charged a penny for debit cards had Durbin not interfered," Mr. Hunt said. "Maybe we should just go to Dick Durbin and ask him how to run a business. Since he's got all the answers, since the government's been so good about balancing their budget."

Customers weren't happy about the debit-card fees. Many began leaving for smaller banks that still offer free checking accounts.

Greg McBride, senior financial analyst at Bankrate.com, suggested that banks started giving into the pressure to drop the debit card fees when some of their wealthier customers began leaving.

"When you see banks starting to backpedal, it starts to indicate maybe it was those higher-income consumers that were headed out the door," he said. "The wrong customers were leaving. If it's unprofitable customers walking out the door, the fee works. If it's profitable customers walking out the door, then the bank has a problem."

Still, banks are likely to turn to checking fees and cancel rewards programs to make up for the lost revenue.

"Unfortunately, we have to look at all sources of revenue to recoup the fees," Mr. Hunt said. "We're trying to satisfy the customer and at the same time remain solvent. It's a tricky situation."

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