Bank Fee Debacle is the First Occupy Wall Street Victory
By Dan Freed
NEW YORK (TheStreet) — For a movement without an agenda, Occupy Wall Street is off to a pretty good start–scaring JPMorgan Chase(JPM_), Wells Fargo(WFC_) and SunTrust Banks(STI_) away from their plans to charge customers who use their debit cards to make purchases.
None of these banks cited Occupy Wall Street in explaining their reversal, and because Occupy Wall Street does not speak with one voice, it cannot be said to have demanded these banks reverse course on their planned fees.
Still, it does not take a genius to figure out that charging fees to consumers for their use of debit cards is exactly the kind of thing nearly all participants in Occupy Wall Street would be likely to oppose. What the movement is doing, as many commentatorshave pointed out recently, is changing the national conversation, much as the Tea Party did before dealing Democrats a resounding defeat in the Congressional mid-term elections. these banks cited Occupy Wall Street in explaining their reversal, and because Occupy Wall Street does not speak with one voice, it cannot be said to have demanded these banks reverse course on their planned fees.
JPMorgan CEO Jamie Dimon has been a prominent target of the protestors (see video above). Dimon, a defiant critic of many proposed financial services industry reforms, has been hinting at the fee increase ever since his famous statement in the wake of the passage of Dodd Frank financial reform legislation: “If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger.”
Still, it was Bank of America(BAC_) was out in front in announcing the new debt fee, drawing heaps of scorn upon itself, as TheStreet found out in a recent poll. Bank of America is now reported to be reconsidering aspects of its fee program, according to The Wall Street Journal. Bank spokespeople did not return an email message seeking to confirm the report.
Bank of America nixes $5 debit card fee
By TIM MAK
In a win for President Barack Obama and Occupy Wall Street, Bank of America will abandon its plans to charge customers $5 per month to use debit cards.
“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” said David Darnell, co-chief operating officer, in a statement Tuesday. “Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”
The move comes as banks generally recoiled at the public outrage that followed Bank of America’s announcement of the new fee.
Last week, a number of large banks announced that they would not follow suit and charge a monthly debit card fee, and Wells Fargo said Monday that it would give up its pilot program that charged $3 per month to use a debit card.
Bank of America had already shown signs of backtracking – last Friday, it announced that it was considering allowing users more ways to avoid the fee.
Bank of America decided to nix the entire initiative after public and political pressure from average customers all the way up to the President of the United States.
“Well, you can stop [the fee] if you say to the banks, ‘you don’t have some inherent right just to, you know, get a certain amount of profit if your customers are being mistreated,’” Obama said recently to ABC News.
Democratic Senator Dick Durbin (D-Ill.) was another politician champion for the cause of eliminating these fees, and even openly called for Bank of America customers to flee the bank.
“Bank of America customers, vote with your feet, get the heck out of that bank,” Durbin said earlier this month. “Find yourself a bank or credit union that won’t gouge you for $5 a month and still will give you a debit card that you can use every single day. What Bank of America has done is an outrage.”
Rep. Peter Welch (D-Vt.), who worked with Durbin to fight against swipe fees in the House, said that consumers deserved the credit.
“This is a great victory for consumers. The Bank of America was reaching its hands into another pot of consumers’ money, and this time consumers threatened to chop it off,” said Welch. “They were tired of being ripped off.”
Over the weekend, progressive bloggers gave credit to the Occupy Wall Street movement, POLITICO reported. “Keep up the good work Occupy and thanks for your help!” said the progressive AMERICAblog.
“They alienated everyone who has one of their debit cards. And they did it in a time when there was already a backlash against greedy banks from the Occupy Wall Street protests. Those protests have already opened up an opportunity for bank accountability that many groups are capitalizing on,” wrote David Dayden at FireDogLake.
BoA’s move to kill the debit fee was first reported by the Wall Street Journal.
New Bank Fees Drive Customers to Credit Unions
New debit card fees at major banks are prompting many longtime customers to switch to credit unions.
“If everybody does it, then maybe banks will pay attention and we can change the way things are,” said Bradley Cordle, who is closing her accounts with two large banks and opening a new one with Charlotte Metro Federal Credit Union.
Charlotte Metro has seen a 350 percent increase in new account applications online and an 88 percent increase at branches in recent weeks, according to chief operating officer Nicol Morris.
Meanwhile, the National Association of Federal Credit Unions has seen traffic more than triple on its search website CULookup.com, according to Patty Briotta, NAFCU’s public relations manager.
While non-profit credit unions and many community banks still offer fee-free debit cards, large banks insist they need additional funding to maintain the vast ATM networks and other services consumers expect from them.
“There have been studies done by the Federal Reserve and others that would suggest a checking account costs between $200 and $300 a year to monitor, to give, to operate,” said John Stumpf, CEO of Wells Fargo.
However, consumer backlash may be prompting some banks to consider alternative revenue streams to maintain those accounts. Chase and Wells Fargo are ending pilot programs that charged customers in certain test markets a monthly debit card fee of $3.
And Bank of America may soften the impact of a $5 debit card fee planned for next year. The Associated Press cites a source at BofA, suggesting the bank will make it easier for customers to avoid the fee by maintaining minimum balances or signing up for additional financial services.
According to analysts, the debit card fees were an attempt to offset losses due to the Dodd-Frank Act’s Durbin Amendment, which imposes a cap on what large banks can charge merchants for each debit card transaction. What was once an average fee of 44 cents per transaction is now limited to approximately 24 cents.
“The reality is we were all paying these fees before,” said Ryan Hamilton, a professor specializing in consumer behavior at Emory University’s Goizueta Business School. “Retailers were charging a little bit more for every box of pasta that you bought to help cover some of these exchange fees.”
While some bankers argue the new fees offer more transparency, many consumers don’t like seeing a bill for, what used to be, a “free” service.
“The fact that the charge is so visible, so salient, it’s gonna appear every month on their bill, is what’s driving a lot of this change,” Hamilton said.
It’s change that credit unions are taking to the bank.
Bank Transfer Day Set As Activists Encourage Consumers to Switch to Credit Unions and Smaller Banks
San Francisco, CA – infoZine – Saturday, November 5 has been dubbed Bank Transfer Day by grassroots activists upset with rising bank fees, including the new $5 debit card fee that Bank of America will start charging its customers in 2012. Consumers are being encouraged by Bank Transfer Day organizers to switch their accounts to credit unions or community banks on that day.
Consumers Union, the nonprofit advocacy arm of Consumer Reports, has developed a set of tips to help guide consumers interested in switching their accounts to a new financial institution. The tips along with a “How-To Change Banks” video are available online.
‘Bank of America’s new debit card fee was the last straw for many consumers who are tired of banks that got bailed out that are now turning around and hiking fees,” said Norma Garcia, director of Consumers Union’s financial service program. “If you’re upset over how your bank is treating you, then it might be time to move your money to another financial institution that can offer you a better deal.”
For consumers interested in switching their accounts, Consumers Union offers the following tips:
- Open your new bank account with a small deposit – leaving the bulk of your funds with your old bank. Deposit just enough to avoid any fees you may be charged for maintaining a low balance.
- Next make a list of all the automatic payments and deposits scheduled to go in and out of your old account each month. If you have direct deposit, ask your employer to reroute your paychecks to your new account. Find out what date the first deposit will occur. Once you know the date, reschedule each automatic payment or debit to come out of your new account and make sure to ask the company what date the change will apply.
- Leave some cash in your old account for at least one month.
- Once you are sure that all automatic payments and all direct deposits are coming and going from your new account, electronically transfer the final funds from your old account.
- Once the transfer clears, follow the procedure laid out by your old bank to close your account. If you don’t close it, you might get hit with a monthly account maintenance fee even after you stop using it. And be sure to get written confirmation that the account is closed.
For more detailed information, see Consumers Union’s Move Your Money checklist of steps to take to ensure that all of your bills are paid on time and you avoid being charged overdraft fees. ( PDF link )
“Bank of America should listen to its customers and drop this unfair debit card fee,” said Garcia. “Consumers who are unhappy with new bank fees can vote with their feet and take their money elsewhere. There are many banks and credit unions that are eager to serve consumers fed up with rising fees.”