Bank of America Drops $5 Debit Card Fee
Bank of America Corp scrapped plans to charge a $5 per-month debit fee, handing a victory to consumers and protesters angry with big banks.
The second-biggest U.S. bank, whose shares were down over 3 percent, said on Tuesday that the move was in response to customer feedback and competition. Bank of America was under pressure to make the change as rivals backtracked from plans to charge customers for using their debit cards.
"It's a sign of consumer power in action," said Norma Garcia, manager of the financial services program for Consumers Union. "This is a sign of the marketplace working."
Last week JPMorgan Chase & Co and Wells Fargo & Co decided to cancel test programs, while SunTrust Banks Inc and Regions Financial Corp said on Monday that they would end monthly charges and reimburse customers.
Banks began crafting the monthly charges to make up revenue lost to a law that slashes the fees they charge retailers when consumers swipe their cards. The fees sparked a firestorm of criticism from consumers and politicians, and many smaller banks and credit unions shunned the practice.
U.S. Sen. Richard Durbin, the author of the swipe fee legislation, told reporters on Capitol Hill that the reversal by major banks was "an amazing victory" for consumers across the country.
"What we have basically proven is that with transparency and competition, consumers will make a choice about where they want to do business and walk away from those they think are not treating them fairly or are overcharging them," the Illinois Democrat said. "I hope the banking industry learns from this."
Anti-Wall-Street protesters, who set up camp in a New York City park more than six weeks ago to demonstrate economic inequality, also claimed the move by Bank of America as a victory, but one they shared with several other anti-bank initiatives.
"It's certainly an indication that Occupy Wall Street and the occupations that are going on across the country are steering public discussion," said Ed Needham, a spokesman for the Occupy Wall Street movement.
"This is what the movement would consider a very, very small first step on rectifying an oppressive dynamic between the financial services industry and the 99 percent."
Protesters say they are upset that the billions of dollars in bank bailouts doled out during the recession allowed banks to resume earning huge profits while average Americans have had no relief from high unemployment and job insecurity.
Needham said that among the other initiatives that could be credited with forcing the back-down by Bank of America was the month-long Bank Transfer Day campaign.
The Bank Transfer Day campaign, started by 27-year-old Californian Kristen Christian on Facebook on Oct. 4, is encouraging people to close their bank accounts and move their money to credit unions on Saturday.
Bank of America, which planned to start charging the fee next year, began softening its stance last week. The Charlotte, North Carolina, bank planned to give customers more ways to avoid the charge, such as maintaining minimum balances, having paychecks direct-deposited or using their Bank of America credit cards
"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-Chief Operating Officer David Darnell said in a statement.
The reversal is another embarrassing about-face for Bank of America Chief Executive Officer Brian Moynihan. Last spring, he disclosed plans for a modest dividend increase this year, only to have the Federal Reserve Board deny the request.
Nancy Bush, a longtime bank analyst and contributing editor at SNL Financial, said she was surprised the bank backtracked after Moynihan's "flip-flop" on the dividend.
"If you're going to set a policy, set a policy," Bush said. "Talk it through beforehand, think through the ramifications and stick to your guns."
Bank of America's third-quarter results show Moynihan is making progress in turning around the company but his management team's communications skills "still need work," she said. The bank was also a victim of bad timing and joined other banks in misjudging customer sentiment, Bush said.
Shares of Bank of America were down 3.1 percent at $6.62 in afternoon trading. The KBW Bank Index was down 2.2 percent after a proposed Greek referendum threatened to upend a European bailout plan to contain the sovereign debt crisis.