BofA Cancels Plans For Debit Card Fee
ROBERT SIEGEL, HOST:
This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.
GUY RAZ, HOST:
And I'm Guy Raz. Customers howled when Bank of America announced a $5 monthly fee for debit card purchases. Well, never mind. Bank of America has decided not to charge that fee and the backlash was strong enough to scare other banks away from the idea, too.
As NPR's Larry Abramson reports now, consumer groups are now watching to see whether banks will impose other fees to make up for that lost revenue.
LARRY ABRAMSON, BYLINE: The plan to charge consumers who make debit card purchases was unpopular right from the get-go. Even the consumer-in-chief, President Obama, chastised banks contemplating the idea. He spoke on ABC in October.
PRESIDENT BARACK OBAMA: My hope is is that you're going to see a bunch of the banks who say to themselves, you know what? This is actually not good business practice.
ABRAMSON: The president was echoing outrage from consumer groups and members of Congress who said consumers should not have to pay to get access to their own money. Bank of America took the lead in announcing the fee in September after Congress limited the amount that banks could charge merchants for debit card transactions.
Today, BofA spokeswoman, Anne Pace, said the banking giant had second thoughts.
ANNE PACE: Well, over the past couple of weeks, we've listened very closely to our customers and decided that, given that feedback and the competitive conditions in the market, that we would not proceed with our planned debit usage fee.
ABRAMSON: Competitive conditions in the market refers to a rush by other banks to distance themselves from the fees in recent days. JPMorgan Chase confirmed it would not charge its debit customers on Friday. Sun Trust announced yesterday it would no longer charge its accountholders and is even giving a full refund to customers who have already paid.
Some banks began using the absence of debit fees as a marketing tool. That left BofA as an outlier. According to Patrick Keefe of Credit Union National Association, customers have been turning to his members in an attempt to escape debit fees.
PATRICK KEEFE: For the most part, the larger, you know, population centers where stories like this and also where mega-banks are more likely to be, yeah, they're seeing people coming in inquiring about credit unions and joining, in fact.
ABRAMSON: Consumer groups use the opportunity to tell accountholders they can switch banks. They offer tips on how to do this without messing up online bill paying systems. Consumers Union's Norma Garcia says the reaction taught banks that consumers have little tolerance, given current anger at the financial industry.
NORMA GARCIA: And so, for banks, it really becomes a question. The calculus is, you know, what do we need to do to attract customers instead of what can we get away with?
ABRAMSON: The controversy also sparked social networking attacks on the banking industry. On Facebook, Bank Transfer Day urges consumers to switch their deposits to credit unions before November 5th. These efforts will live on, even though the major banks have now turned their backs on the debit fee.
One good thing, some would say, about the debit fee was that it was transparent. Now, consumers may have to comb through their statements to see whether the fee has been reincarnated in another form.
Greg McBride of BankRate.com says, over the past year, consumers have already seen a 30 percent decline in debit reward programs and there's been a big drop in free checking accounts.
GREG MCBRIDE: Seventy-six percent of banks had a free checking account of the non-interest variety two years ago and that's down to just 45 percent at this point in time.
ABRAMSON: Bank of America said it did not envision imposing new fees to make up for this one's demise. The company has already announced plans to shed thousands of jobs to cut costs. If it wants to raise more revenue, BofA will have to find ideas that don't enrage consumers.
Larry Abramson, NPR News, Washington. Transcript provided by NPR, Copyright NPR.