Have you noticed all of the publicity Bank of America has received since news came out about their plans to start charging a monthly fee for debit card usage? As I reported on Friday, BofA plans to roll out a $5 monthly fee when customers use their debit cards to make purchases. I've been seeing news on this every night on the national news. They have reported about this online petition which asks BofA to reverse their decision about adding this fee. The petition currently has over 137,000 online signatures. Also, Consumers Union has called for Congress and bank regulators to investigate this new fee. Here's an excerpt of Consumer Union's press release:
Following Bank of America’s announcement of a new $5 monthly fee on debit card transactions, Consumers Union, the public policy and advocacy division of Consumer Reports, called on Congress and federal regulators to investigate the controversial new fee.
In letters to the House and Senate banking committees and financial regulators, the organization urged them to investigate whether the new monthly fee is justified and whether it takes unfair advantage of consumers simply to boost profits. The letter notes that the fee, which could cost Bank of America customers an extra $60 per year, comes at a time when American families are hard pressed to pay additional charges.
Perhaps a better response would be for customers to close their Bank of America accounts and move their money to another bank or a credit union which has more customer-friendly policies. As I discussed last week, you can find many internet banks, community banks and credit unions which provide free checking accounts that won't be charging you for using a debit card. Bank of America's new debit card fee hasn't started yet, so it's not an issue of insufficient communication. Customers have plenty of time to move their money.
I'm more concerned with banks making account changes that violate the spirit of the account disclosures. An example is an institution increasing an early withdrawal penalty on existing CDs based on a generic clause in its account disclosure.
Banks are justifying the new fees based on the debit card interchange fee regulation that took effect October 1st. This caps debit card interchange fees to 21 cents with an extra 0.05% of transaction price to cover fraud prevention costs. Banks and credit unions that are under $10 billion in assets are exempt from this cap.
It's possible that this debit card regulation may help to shrink the too-big-to-fail banks. Bank of America and other large banks are using the new regulation as a reason to introduce new fees which is causing public outrage. Hopefully, small banks and credit unions will be able to pick up new customers who flee from these too-big-to-fail banks. However, it is easier to sign a petition than to move your money.