Commentary

Checking In On The BOA Debit Card Debacle

Just as the populist Occupy Wall Street movement was gaining momentum nationally late last month, Bank of America announced its plans to tack a $5 monthly fee on the statements of customers who use their debit cards to make purchases. You got the feeling from the get-go that BOA was just trying to rile up the hoi-polloi against those dreaded “regulators” so that we’d demand the sort of action that a couple of congressmen have now taken to repeal the so-called Durbin amendment to the Dodd-Frank act.

“The Dodd-Frank Act's Durbin amendment … caps fees banks can charge merchants for processing debit card transactions at 21 cents per transaction from an average of 44 cents, potentially costing banks billions of dollars,” Reuters’ Joe Rauch reported when the BOA fee was announced. “The economics of offering a debit card have changed," BOA spokeswoman Anne Pace said at the time.

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The countervailing bill authored by Reps. Jason Chaffetz, a Utah Republican, and Bill Owens, a New York Democrat, isn’t given much chance of succeeding despite Chaffetz’ statement that it “fixes the disastrous consequences of this bill” which, he says, “increases the costs of doing business on everyone,” as reported in Bloomberg BusinessWeek.

“For members of Congress today to do the bidding of the country's biggest banks and attempt to repeal these reforms is an affront to merchants and their customers,” responds Mallory Duncan, the chairman of the Merchants Payments Coalition and general counsel for the National Retail Federation.

Nearly 225,000 of those affronted customers have signed an online petition on Change.org calling on BOA to cancel the fee. It was started by a 22-year-old bank customer, Molly Katchpole, who is quoted in a Change.org press release as saying: "I can barely afford to make ends meet. Now I'm expected to hand over money to Bank of America each month just for using my own debit card?"

The release goes on to say that Andrew Plepler, Bank of America’s global corporate social responsibility executive and consumer policy executive, had called Katchpole to empathize with her “frustration,” but Ann Carrns reports in the New York Times“Bucks” blog that it still intends to implement the fee early next year.

David Lazarus, the consumer affairs columnist for the Los Angeles Times, and Richard Hunt, president of the Consumer Banking Association, debated the numbers involved following a PBS NewsHour report on the whys and wherefores of the new fee that carried a headline suggesting that BOA was “Risking Public Ire.” Indeed.

"This frankly is just an incredible marketing and PR debacle," independent banking analyst Bert Ely told the AP earlier this week. "They roll this thing out with no testing, make it nationwide, it's higher than anybody else -- what kind of reaction do they expect?"

I suppose that your opinion on who won the Lazarus/Hunt debate will be colored by whose side you were on going into its taking place –- consumers and retailers or the big banks -– but Lazarus hammered home the point that the 21 cents figure wasn’t plucked from the rarified air of politics as usual.

The Federal Reserve itself “determined that this is a ‘reasonable and proportional’ amount, reflecting how much it actually costs banks to process a debit card transaction,” he writes. Then he points out that “some consumer advocates say the actual cost to banks, thanks to the huge volume of automated transactions processed daily, is closer to a penny or two.”

In an interview earlier this month, President Barack Obama blasted BOA, as the Washington Postput it. “You don’t have some inherent right just to, you know, get a certain amount of profit, if your customers are being mistreated,” he said.

The Heritage Foundation’s Diane Katz takes Obama to task in a Boston Heraldop-ed piece, blaming him and Congress for the regulations that led to the fees.

“A more judicious chief executive would likely have suggested that bank customers -- not government -- should punish (or reward) Bank of America for changes to its fee structure,” she writes. “Instead, the president lambasted bank executives for attempting to offset revenue losses, as if profit-making is inherently immoral or corrupt.”

In other news on the plastic front, the National ATM Council and several operators of the cash-dispensing machines have filed an antitrust suit again Visa and MasterCard claiming “they are the ringleaders, organizers, and enforcers of a conspiracy among U.S. banks to fix the price of ATM access fees in order to keep the competition at bay." So says Jonathan Rubin, a managing member with the law firm representing the plaintiffs, in the Los Angeles Times “Money and Company” blog.

The headline over Forbes’ Halah Touryalai’s story yesterday about the Chaffetz and Owens bill carries an interesting headline: “New Bill Aims To Kill Durbin's Debit Card Fees.” Last I looked, it was Bank of America that was charging the fee, but there’s so much spin going on in this story that evidently even copy editors, bastions of correctness that they are, are getting dizzy.

1 comment about "Checking In On The BOA Debit Card Debacle".
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  1. Tom Keane from USA Weekend, October 14, 2011 at 10:16 a.m.

    So, this Durbin "consumer protection" clips 52% of the transaction fee from the banks. Of course that fee had been BY THE RETAILERS. They lobbied to get this gift added to Dodd-Frank with the implication that they would pass the savings on to consumers. Yea, right! Have you seen any decrease in retail prices? No, the retailers are pocketing the approx 50% savings. Loolk for some big NRF contributions to Durbin and other Dems this year.

    At the same time the banks are saying "Hell, a key business unit just got whalloped by 50%...we've gotta make that up somehow.' If they don't make that up bank employees get laid off plain and simple. So, Nr. Forbes who is the real villian here?

    Gotta love the President saying hey stop complaining if your business gets cut...you've got no right to make a certain profit. Hey, Mr. President how about I cut my tax payment this year by 52% you don''t have, you know, a right to a certain profit.

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