Wells Fargo abandons debit card fee. Is Bank of America next?
Wells Fargo & Co. is the latest bank to ditch plans for debit card fees in the face of growing consumer anger.
Could Bank of America be the next to back down?
Beginning Nov. 15, Wells Fargo had planned to charge checking account customers in Georgia, New Mexico, Nevada, Oregon and Washington a $3 monthly fee if they made a purchase or payment with their personal or business debit cards.
It was clearly an effort to see if Wells’ customers would put up with the bank’s new moneymaking strategy.
But outrage over such fees has been so intense that Wells canceled the test on Friday before it could even start.
The announcement came shortly after JPMorgan Chase said it would end its test of $3 monthly debit card fees in northern Wisconsin and Georgia.
Wells decided to try the debit card fee in August, just weeks after the major banks lost a hard-fought lobbying effort to delay the Oct. 1 implementation of the so-called "swipe fee" cap.
The new regulation limits the fee banks can charge merchants for debit card transactions to 24 cents per purchase, far less than the average 44 cents they had been charging.
Wells Fargo estimated that would cost the bank $325 million per quarter in lost revenue.
That prompted chairman and CEO John Stumpf to say Wells would try to recoup that money from its customers by raising minimum account balance requirements, implementing a surcharge on checking accounts and a debit card fee.
That brought a stern rebuke from U.S. Sen. Richard Durbin, D-Ill., who sponsored the amendment to limit swipe fees.
“It is disingenuous for banks to claim they are somehow entitled to make up reductions to a revenue stream that they never would have received in the first place in a transparent and competitive market,” Durbin wrote in an Oct. 19 letter to Stumpf.
It was also the kind of thinking at the big banks that led to a brewing consumer revolt epitomized by Bank Transfer Day.
Kristen Christian, a Los Angeles art gallery owner with personal and business accounts at Bank of America, was so fed up with endless fees and poor customer service that she launched a campaign to get big bank customers to move their money to credit unions on Nov. 5.
More than 66,000 like-minded customers have said they will on the event’s Facebook page.
Indeed, it was Bank of America’s plan to start charging all but its biggest depositors a $5 debit card fee that has garnered the most attention and consumer discontent.
There are media reports, all citing unnamed sources, that Bank of America is considering more ways to make more customers exempt from the debit card fee.
Currently, only customers with a few premium checking accounts would not have to pay the fee.
But CNNMoney, for example, says Bank of America is considering a new plan that would exempt customers who have their paychecks deposited or use one of the bank’s credit cards.
These leaks are probably trial balloons on Bank of America’s part to see if it can save face by walking back, but not entirely canceling, the debit card fee.
I suspect that’s just wishful thinking on the part of the bank’s irritated CEO Brian Moynihan.
During a town hall meeting broadcast from the bank’s headquarters last week, Bloomberg News reports that Moynihan told employees: "I, like you, get a little incensed when you think about how much good all of you do, whether it's volunteer hours, charitable giving we do, serving clients and customers well."
The bank’s critics “ought to think a little about that before you start yelling at us," Moynihan said.
So he really doesn’t get what’s going on here.
I suspect Bank of America isn’t going to make this brouhaha go away with anything short of a total revocation of the debit card fee for all customers.
Then we’ll have to see whether the large regional banks planning to implement debit card fees -- I’m talking about you SunTrust and Regions Bank -- are willing to go it alone without some cover from the big banks.
If debit card fees are ditched before they’re widely implemented, this will be a major victory for American consumers.