Bank of America’s decision to charge debit card users a monthly fee of $5 came under harsh criticism from Sen. Dick Durbin, D-Ill., who accused the bank of “trying to find new ways to pad their profits by sticking it to its customers.”
In an internal communication BoA said it would begin a phased roll-out of the new fee, starting in early 2012. The bank noted that the economics of offering a debit card had altered as a result of recent regulation.
Durbin, whose amendment to the Dodd-Frank Act placed caps on fees which card issuers charge to merchants, accused the bank of enjoying “years of raking in excess profits off an unfair and anti-competitive interchange system.” He noted that BoA “hauls in billions in debit interchange each year.”
Durbin added that as of October 1, 2011, when new Federal Reserve Board guidelines go into effect, “banks that try to make up their excess profits off the backs of their customers will finally learn how a competitive market works. Under the Fed’s final rule, the maximum fee that debit card networks can charge per transaction will be 21 cents, plus the product of multiplying the value of the transaction by 5 basis points. This compares to the current average fee of 44 cents per transaction.
Meanwhile, Norma Garcia, manager of Consumers Union’s financial services program, predicted that many banks and credit unions will be eager to attract customers unhappy with the new fees. She noted that while other big banks such as Wells Fargo and J.P. Morgan Chase are testing debit card fees in certain markets, “plenty of banks” are still offering debit cards without a fee.
The National Retail Federation also condemned the BoA decision. “Every time Congress takes a step to protect consumers, the banks use it as an excuse to raise fees,” said senior vice president and general counsel Mallory Duncan.