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November 01, 2011 12:35 PM Bank of America’s quick reversal

By Steve Benen

Bank of America recently announced a controversial move: it would start charging customers $5 a month to use their debit cards. This, despite BofA’s $6.2 billion quarterly profit.

As far as Bank of America was concerned, it just didn’t have a choice. BofA was being forced into the change as a result of lost revenue from new government swipe-fee regulations.

No one — other than other banks — was pleased, and the debit-card fee generated fierce criticism from customers to consumer advocates to President Obama. Last week, Bank of America started backpedaling, insisting it would offer customers more ways to avoid the fee.

Today, BofA gave up entirely.

Bank of America Corp. is dropping its plan to charge customers $5 a month for making purchases with their debit cards, a person familiar with the situation said.

The move is a dramatic retreat following decisions by several rivals in recent days to drop customer tests of the new fees. SunTrust Banks Inc. and Regions Financial Corp. also said Monday that they will stop charging customers for debit-card transactions.

Bank of America decided against the fees due to negative customer feedback on the plan and the moves by rivals, which left the Charlotte, N.C., lender as the only big bank planning to levy the fee on some customers next year.

The timing of the announcement was probably not accidental — a growing effort to have customers switch to credit unions had marked this Saturday as “Bank Transfer Day.”

So, here’s the question for Bank of America: if the fee was absolutely necessary, and was the unavoidable outcome of those new government regulations, why was it cast aside so quickly in the face of public outrage?

Or put another way, what are to make of weeks of BofA rhetoric, claiming the bank had no choice but to impose this fee?

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

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  • Emily on November 01, 2011 12:41 PM:

    BofA did, however, start charging me $3/month for copies of the checks I wrote.

  • OwnedByTwoCats on November 01, 2011 12:41 PM:

    We are to make of it that BofA used the cut in merchant fees as an excuse to get more revenue.

  • filkertom on November 01, 2011 12:42 PM:

    That they're lying greedy f**ks?

    This has been....

  • bleh on November 01, 2011 12:44 PM:

    ...what are to make of weeks of BofA rhetoric, claiming the bank had no choice but to impose this fee?

    The same as was made of the auto industry's rhetoric about how requiring air bags (for such a silly reason as saving drivers' lives) would require a price increase of hundreds -- even thousands! -- of dollars per car, cost thousands of jobs, bankrupt the industry, destroy the economy, and send us all back to the days of donkey carts. (Until, of course, they discovered it was a selling point, at which point they added side air bags, passenger seat air bags, etc.)

    Or the same as we might make of the fossil-plant electrical generation industry claiming that scrubbers and emission limitations (for such silly reasons as saving people's lives and avoiding large-scale environmental destruction) will add huge costs to consumers' bills, cost thousands of jobs, bankrupt the industry, destroy the economy, and send us all back to burning twigs and peat.

    Why does anyone even pay attention to this garbage? The people who write it and say it certainly don't believe it; why should we?

  • Jim Pharo on November 01, 2011 12:45 PM:

    "Or put another way, what are to make of weeks of BofA rhetoric, claiming the bank had no choice but to impose this fee?"

    Steve, I think we can make out that BoA was full of hooey. Shocking, I know!

  • sf on November 01, 2011 12:52 PM:

    Though BoA has retreated, I hope everybody who had plans to cancel their big four accounts does so. Local banks are more responsive to customers. This is a way to vote with our feet. Besides, what better way to end the big bank stranglehold on this country than to starve it? No customers, no money.

    And how about paying interest again on savings accounts to those who are fortunate enough to have one? Right now, big and small banks can make loans, including zillions of car loans, using money from savings accounts for which they pay literally next to nothing to the account holders. A bank that started paying interest on savings accounts again, as an earned fee for use of that money, would make me switch on general principles: it would show respect and to its customers as people, not as useful gullible tools.

    Let's do a little bank reform by using our business as reward for better behavior.

  • Mudge on November 01, 2011 12:52 PM:

    Netflix and now BofA make decisions that needlessly screw the public then reverse them. This happens when you're only focus is increasing your profits quarter by quarter. It was never a case that BofA would lose money as much as it would stifle their growth. Much like the housing bubble, banks (and their upper level management)envision that they are on an infinite growth trajectory.

  • c u n d gulag on November 01, 2011 12:56 PM:

    Their CEO ought to be thankful he's not head of 'The Bank of Japan.'

    After a decision as stupid as that $5 fee was, and this about face, he'd be handed a knife, and told to 'save face' - by committing seppuku.

    "We'll close the door as we leave, ok Boss?"

  • maggie on November 01, 2011 12:57 PM:

    So I wonder, are they actually dropping the fee, or are they droping it under certain circumstances, ie if you maintain a high balance, etc...

  • Alex on November 01, 2011 1:05 PM:

    I haven't heard much mention of the fact that Wells Fargo is also charging a monthly fee for customers using their debit cards. Is that because the Wells Fargo fee is only $3 instead of $5? Someone help me out here.

  • Danp on November 01, 2011 1:06 PM:

    Has anyone noticed store prices dropping now that the swipe fee has been transfered to the banks? I didn't think so.

  • sick-n-effn-tired. on November 01, 2011 1:09 PM:

    @ maggie I just got a mailer from B of A ( not my account my wife's)informing us that there would be a $25 a month "maintenance fee" if certain account levels ($5000 checking and 10k savings) were not maintained . I told her -time to switch , just on principle even if she has sufficient money. $25 a month for the privilege of using your own money. Amazing , considering most of the banking never even involves actual human beings.

  • Old Uncle Dave on November 01, 2011 1:10 PM:

    Take your money from the banksters and put it in a local credit union. You'll be surprised how good it makes you feel.

    Find a CU near you here:
    http://www.findacreditunion.com/

  • John Weiss on November 01, 2011 1:12 PM:

    Here's what my wife and I did. We found a local credit union that provided the services we need. Then we moved our money and cut up the big bank credit/debit cards. And we're never going back.

    I suggest that you all do the same. Too big to fail? Cut 'em down to size.

  • zandru on November 01, 2011 1:19 PM:

    Unleash "The Market"™ On Them

    I'm with all of you who are advocating moving to local banks and credit unions. If it hurts the Big Banks, well, that's just their much worshipped "invisible hand" at work.

    "The Market" really hurts, when you've grown accustomed to a cartel with near-monopoly powers. (Heh, heh, heh...) How's that "creative destruction" feel now, Wells Fargo? BoA?

    "testask fringe" - that's what they always call the "99%"

  • square1 on November 01, 2011 1:41 PM:

    Steve Benen is focused on the completely wrong issue. This isn't about whether BofA was being honest or not. Yes, BofA lost revenue as a result of new regs. Yes, they sought to find a new revenue stream by creating a new fee. And, yes, they apparently changed their mind after discovering that the loss of good will and depositors' accounts wasn't worth all of the increased revenue.

    This is what businesses do. They try to make money. So what? They don't have to apologize for trying.

    The important question that we have to ask is how we, as a society, feel about banks operating like this.

    One view is to say that the market is self-correcting and requires no governmental interference: After all, BofA changed its policies in response to consumer pressure and this proves that market mechanisms are sufficient to keep banks honest.

    Another view is to say that it is unrealistic to expect public outrage to sufficiently check large banks every time they try to screw their customers. That we need laws and regulations to protect consumers from certain business practices.

    This is the debate that we should be having: Should banks like BofA even be allowed to impose various fees? (For example, should there be a cap on an ATM withdrawals? Say, 1% of the withdrawn amount?)

    One of the less appealing personal characteristics of President Obama is his self-proclaimed role as public moral scold. I have no interest in the personal views of politicians, President Obama included. If you think that a business practice should be regulated in the interest of the general welfare, then pass a law or enact a regulation. If you don't like what BofA is doing then stop them from doing it. Otherwise STFU.

  • bcamarda on November 01, 2011 2:38 PM:

    What we're to make of it is they've figured out a quieter way to skim that revenue from us.

  • els on November 01, 2011 3:03 PM:

    I used to bank with Suntrust, but i transferred my account to a credit union two weeks ago. it doesn't matter to me that they've supposedly changed course, i'm not going back. of course, Suntrust is still going to charge $7 a month for the "privilege" of having a checking account with them, but they're being "gracious" right now and waiving it if you have direct deposit. but there did not appear to be a guarantee that the waiver would continue...

    when i went in to close the account, the teller asked {dejectedly}: "Are you moving the account because it's changing?" and i said {mostly politely} "yes i am, especially the monthly fee, but also the debit card fee". when she went to the manager to get my cash he asked {cheerfully} "what can i do for you?" and she replied {dejectedly, again} "the same thing you can always do, she's closing her account." and then i thought 'stupid fucktards, you shoulda thought about THAT!'

    re Ole Uncle Dave: indeed, it did make me feel good.

  • FriscoSF on November 01, 2011 3:13 PM:

    square1
    ....One view is to say that the market is self-correcting and requires no governmental interference:...

    If hte market is self-correcting, WHY did the banks need my tax dollars to bail them out ?

    If the Market is self-correcting, WHY did we need TARP?

    Maybe we should return to reasonable regulation of Banks and prevent Investment banks from eating up cinsumer banks

    Maybe we should return to anti-trust enforcement that prevents predatory corporations from buying their competition

    Maybe we should return to 'single state' banks that operate only in one state instead of nation wide
    WHAT have we gained by allowing banks to operate nation wide?

    Maybe we should end the policy of 'TOO BIG TO FAIL'

    ... and maybe, we should put some bankers in JAIL

  • Kevin (not the famous one) on November 01, 2011 4:11 PM:

    Everything SF @ 15:13 said.

    I thought I'd give that link a whirl that Old Uncle Dave supplied:
    http://www.findacreditunion.com/

    Sure enough, of the four branches shown, two of my CA entries are correct, one has closed (tough times?) and the last is incorrectly listed in FL, not ID. Suffice it to say it has database issues.

    My dad opened this account for me when I was in gradeschool some 40 years ago and not much has changed really. One time I was in TX and wrote a check for several hundred dollars, the guy was suspicious and phoned the CU asking if this account was good (started rattling off numbers). He was immediately interrupted by the teller asking for the name, which he supplied in disbelief, and she said the check was good. He actually looked at the phone handset in disbelief thinking this was a scam somehow. The fact is, the tellers know who the bad accounts are as there were so few of them. I kinda felt sorry for the guy having to accept a check on the say so of a name only. Ha!

    And why anybody still uses a bank after they brought this economy to its knees will forever be a mystery to me. But I'm willing to listen.

    Craptcha has lines of numbers turned 90 degrees CCW. What is the business model for a company that sells crap?

  • Economic Freedom on November 01, 2011 6:17 PM:

    So, here�s the question for Bank of America: if the fee was absolutely necessary, and was the unavoidable outcome of those new government regulations, why was it cast aside so quickly in the face of public outrage?


    So here's the question for congress: why was the insane push for a new cost to be imposed on all of us in the form of Obamacare NOT cast aside in the face of public outrage? Why does public outrage cause a private business to reverse policy goals but does nothing to cause government to reverse theirs?


    Moral of the story: businesses in the private sector must cater to customers or they go out of business; politicians in the public sector merely have to pander to special interests and worry about holding onto positions of power, whence they can spread the costs of a policy to everyone, while only a few special interests benefit. What we need in the U.S. is to expand that part of the economy which must respond to consumer outrage, and contract that part which can afford to ignore it.

  • Tom Dibble on November 01, 2011 7:14 PM:

    "So here's the question for congress: why was the insane push for a new cost to be imposed on all of us in the form of Obamacare NOT cast aside in the face of public outrage? Why does public outrage cause a private business to reverse policy goals but does nothing to cause government to reverse theirs?"

    Because that "public outrage" is astroturfed outrage over misinformation piped the the Fox News echochamber, perhaps? Perhaps because the actual cost of the healthcare act was negative (as in, it significantly reduces consumer costs as well as government costs)?

    If you disagree with the facts and want to pay more for healthcare, elections are held every two years, minimum. Voice your discontent with your vote.

    BofA's rates for basic checking accounts have far outpaced increased taxation over just about any time horizon you want to use (which isn't dreadfully hard given that tax rates are overall lower now than any time in the past 70 or so years). Increasing costs and decreasing services are not a sign of a responsive-to-the-public company.

  • Anonymous on November 01, 2011 9:10 PM:

    Alex: the last I heard Wells Fargo was charging $3, though that was for a business account. I've no idea if it's different for an individual account, or if they are re-thinking this fee.

  • NofBofA on November 02, 2011 2:39 AM:

    Too little, too late, people are still voting with their feet and leaving BofA because they know it is just a matter of time before another fee pops up (or is hidden in the fine print). Check out www.notbofa.org for a toolkit to help you move accounts to institutions that share your values.

  • mommylinda on November 02, 2011 8:39 AM:

    This is the free market at work. Customers have alternatives and were willing to use them. We have a BofA account, but we have bank accounts at other institutions as well.
    If BofA charged us that fee, we would be outta there. We are customers because they purchased a local bank where we kept an account.
    I think that lots of valuable customers would have left Bank of America, and they finally realized it. Too bad they were so flat footed in the first place.

  • tv22 on November 02, 2011 11:37 AM:

    "if the fee was absolutely necessary, and was the unavoidable outcome of those new government regulations, why was it cast aside so quickly in the face of public outrage?"

    Because they have to respond to the market. If the government imposes a new tax and everyone complains, it doesn't matter, people have no recourse other than to vote people out one at a time. If a corporation, evil capitalists that they are, tries to impose a fee it can and in this case will impact business. They had to respond to this important marketplace force.

  • doug on November 02, 2011 3:03 PM:

    "Or put another way, what are to make of weeks of BofA rhetoric, claiming the bank had no choice but to impose this fee?"

    There is more than one way to skin a cat or charge a fee.

    1. Charge a different fee all together
    2. Increase existing fees
    3. Decrease services.
    4. Any combination of the above.

    How about this question, Have retail prices decreased since the fee cap was put in place at the bequest of retailers?

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