Published on: October 3, 2011
Go figure. The Retail Industry Leaders Association (RILA) says that the announcement by Bank of America that since new consumer protection regulations will be a drain on its profits, it will shortly begin charging its customers a monthly fee of $5 for the use of their debit cards to make purchases, is good news
The fee is designed to make up for the limit on transaction/swipe fees mandated by the Durbin amendment, which was part of the Dodd-Frank financial overhaul law, and RILA says that “according to the Federal Reserve there are 14,821 banks in the United States not affected by debit swipe fee reform,” because they did not charge swipe fees to begin with.
“Bank of America's new fee is great news for every other bank in America. If Bank of America wants to charge account holders to access their own money, every other bank, particularly credit unions and community banks will welcome the flood of customers in search of a new bank,” says Katherine Lugar, executive vice president for public affairs at RILA.
She continues: “For years Bank of America and its big bank peers have been imposing hidden fees on all consumers, whether they used cash, plastic or even food stamps. Swipe fee reform will rein in these fees, increase transparency and allow consumers to see the costs associated with the various payment options and make decisions accordingly.”
At the same time, Merchants Payments Coalition spokesperson Rachel Wolf released the following statement:
"Mega-banks have been ripping off consumers and merchants for years, and will do anything they can to keep the practice going. This is even more of a reason that we need to actively work to make it more difficult for them to run these scams.
"Swipe fee reform is about bringing competition to a fixed marketplace. Retail is a price competitive industry, and many consumers will see savings as a result of the reforms.
"The big banks who try to levy unfair fees will soon learn the lessons of competition as consumers choose banks and credit unions, larger and small, that treat them fairly. The mega-banks can scapegoat and scam all they want, but they are likely to drop the fees when they lose customers to competitors."
Meanwhile ... the Los Angeles Times
reports that as Bank of America and many of its brethren are attacked for assessing fees for the use of debit cards to purchase products and services, Citibank is informing many of its customers “that they soon would have to start paying for their checking accounts unless they maintained significantly higher balances.
“Letters are going out across the country alerting Citi customers of account changes, said the bank's retail banking chief, Stephen Troutner. In many cases, that means customers will have to maintain fatter balances to avoid fees, although Troutner said a basic account option makes dodging charges easier.
“Higher fees are the new reality in retail banking, where regulations adopted in the aftermath of the bank bailouts have reduced revenue from several controversial fees by billions of dollars. At the same time, banks have seen their lending income decline due to the sluggish economy and low interest rates.”