Bank of America customers who use their debit cards to make purchases will be charged $5 a month, the bank announced Thursday. The news sparked widespread outrage among consumers, lawmakers and retailers. Some even encouraged consumers to boycott Bank of America, the nation’s largest bank.
“(W)e urge any and all of our 5 million monthly readers to pull any funds they may have from Bank of America in retaliation for this insanity,” Zero Hedge, a financial blog, posted within hours of the announcement.
In a statement to Reuters news service, a Bank of America spokeswoman blamed the new fee on new federal rules that limit interchange fees, which debit card issuers collect from merchants every time a purchase is made with such a card. “The economics of offering a debit card have changed,” spokeswoman Anne Pace says.
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But Senator Dick Durbin, the Illinois Democrat whose amendment to the Dodd-Frank Wall Street reform act mandated the new rules, blasted Bank of America’s decision.
“After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers,” Durbin said in a prepared statement. “It’s overt, unfair and I hope their customers have the final say.”
Though it’s too early to know whether a true boycott movement will take hold, many commenters on blogs and news sites suggested that they planned to remove their money from Bank of America in protest.
“42 years with BofA. Tomorrow they’re gone!” a commenter with the username “BigMamou” from Port Townsend, WA, wrote in response to a New York Times story. “They will lose 5 checking/savings accounts, a line of credit account, 3 monthly check deposits and ultimately my mortgage. I’ll bet I won’t be alone. BTW, it all goes to my local (since 1923) Credit Union.”
Others were even more direct in their criticism.
“This is lame,” a writer with the username Eric Torres said on the Los Angeles Times site. “Good bye, Bank of America.”
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The National Retail Federation, which lobbied for years for legislation to limit interchange fees, said the megabank’s decision reflects the fact that the nation’s debit card industry is still controlled by a few large players, including Bank of America and Citi, which issue the vast majority of cards.
“Every time Congress takes a step to protect consumers, the banks use it as an excuse to raise fees,” the federation said in a press release. “Just as merchants and consumers are about to get some relief, they’re doing it again.”
Responses were not universally negative, however. Some commenters blamed the Durbin amendment and other government regulations imposed after the 2008 financial crisis for forcing Bank of America and other banks to increase fees. Wells Fargo began testing a similar fee in August. JP Morgan Chase tested, and dropped, a $5 fee for non-Chase customers to use its ATM network in Illinois. Citigroup announced earlier in September that it will charge customers whose accounts drop below $1,500 a monthly fee of $10.
“Many of the comments suggest the bank is sort of a social service or an indefeasible right,” Valerius, a commenter on The New York Times site, wrote. “Truth is, private banks are run by private individuals who have every right to get rich however they can. This is America.”
Meanwhile, the decision drew criticism from some unexpected sources. American Banker, a banking industry trade publication, said the move may illustrate some long-term weaknesses for the nation’s largest bank. “Is Bank of America Corp. charging for debit cards because it is shortsighted or because it is too bloated to compete against smaller institutions for consumer accounts?” Jeff Horwitz, a reporter with American Banker, asked in a story published Thursday afternoon.
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Image: Alex E. Proimos, via Flickr.com