Banks tip hand on new debit card fees
In a victory for major retailers over the nation's largest banks, the Senate last week rejected a bid to delay reforms that will sharply cut fees banks collect on debit card transactions.
The fee cap, which will go into effect July 21, cuts the money banks can charge for debit transactions from 44 cents to between 7 cents and 12 cents per transaction.
I know: about as exciting as a C-SPAN marathon, right?
But in the heat of that futile battle, two major bank CEOs -- Wells Fargo's John Stumpf and Regions Bank's O.B. Grayson Hall Jr. -- tipped their hands on how they plan to recoup the lost profits from their customers.
Wells Fargo, with 9,000 branches, is the nation's second-largest debit card issuer and stands to lose $325 million a quarter as a result of the Dodd-Frank Act cap. Regions, with 1,700 branches, made $346 million on debit card income in 2010.
So, if you're one of their customers, they have big plans for how to pick your pocket next.
Stumpf showed the most chutzpa, running down a few of his favorite fees that stopped just short of a lobby cover charge and pay toilets. Among them:
- Raise minimum account balances,
- Introduce a debit card carrying fee, and
- Implement surcharges on checking accounts.
Nor does Stumpf plan to let those greedy merchants off scot-free, referencing a plan to "unbundle" its merchant plan to allow for creative new service fees for retailers that wouldn't be subject to the cap.
Over at the Regions workshop, Hall said a twofold approach is emerging: Charge consumers for services they previously received for free, and pursue new products that Regions can sell at a profit. It's even toying with redoubling efforts on two old cash cows: high-yield credit cards and auto loans.
"Now we've got to figure out a way to convince not only our customers but also our associates who serve those customers that banking is worth paying for," Hall told a news conference.
Good luck with that strategy, amigo.
Let's face it, if you have to sell your own bankers on the notion that your new moneymaking schemes don't smell, you've probably got some serious bad mojo up your sleeve.
I don't blame the bigs for freaking out. Durbin has been a serious blow to their ability to sell air to the American people.
But cooking up ways to sell more air ain't the solution.
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