Let's be clear on one thing: I don't particularly like Bank of America Corp.'s
Still, I feel like Bank of America earns a reasonable rate of return on interchange fees on debit cards (around 24 cents per transaction under the Federal Reserve Board rule), and could have made up the lost profit in other ways. In the end, this decision will needlessly anger a lot of customers and fuel ongoing hatred of banks by the American public.
But to suggest that somehow Bank of America has overstepped a line and must be punished is deeply misguided. Yet that's just what the President of the United States did.
The obvious answer - and even the politically expedient answer - would have been for Obama to suggest that if customers don't like it, they can withdraw their money and move to another bank. But Obama did something far different by suggesting the Consumer Financial Protection Bureau should instead limit or eliminate such fees.
"This is exactly why we need this Consumer Finance Protection Bureau that we set up that is ready to go," Obama said. "This is exactly why we need somebody whose sole job it is to prevent this kind of stuff from happening."
ABC's George Stephanopoulos pressed Obama again: "Can you stop this service charge?"
Obama responded: "Well, you can stop it because 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. That you have to treat them fairly and transparently.'"
Obama has done several things in those brief sentences.
For one, he's indicated the CFPB should "prevent this kind of stuff from happening," with "this" presumably referring to B of A's debit card charge. For another, in responding to a direct question about the charge, he said it should be stopped because banks have to treat customers "fairly and transparently."
Here's what I don't get: how has B of A failed to live up to that standard? You may not like the fee, but the bank hasn't exactly hidden it. The company stated quite clearly what it was going to charge consumers and why it was doing so. Isn't that the definition of "transparently"?
The second part of Obama's standard is trickier: is the fee fair? It seems strange to me to charge the same fee for customers that use their debit card once during the month versus those that use it 100 times, but as long as the fee is transparently disclosed, I'm not sure it's unfair.
It might be tempting to just write off Obama's comments if they didn't undermine one of the president's signature achievements: the creation of the CFPB. Since its inception, CFPB officials have said over and over again that they aren't trying to micromanage banks, just ensure they aren't using hidden fees or deceptive practices.
But Obama's comments appear less about rooting out abuses and all about micromanagement.
"It would absolutely lead to plain vanilla products and stifle innovation," Richard Hunt, the head of the Consumer Bankers Association, told me on Tuesday. "If you are going to get into the business of telling each bank what they can charge for their products, you might as well nationalize banks."
Put another way: doesn't B of A have the right to charge for its debit cards? For that matter, doesn't a bank have a right to charge for any service it provides, like checking or credit cards? I can remember paying an annual fee for a credit card not that long ago. The B of A charge is akin to that. Are we now saying banks can't do that?
If this is the role carved out for CFPB, then it will truly become what Republicans have feared: a bureaucratic agency that will oversee every decision made by banks. That's not what it was designed to be.
To be sure, the CFPB doesn't appear likely to go after B of A. A spokeswoman for the agency did not comment on the matter and a White House spokeswoman did not return calls seeking comment. But even Elizabeth Warren, the Senate candidate who helped set up the agency, has gone out of her way to emphasize proper disclosure over penalties. Warren's mantra appeared to be that as long as banks were clear about what they were doing and didn't surprise or entrap consumers, the CFPB was unlikely to crack down on them.
Not even Rep. Brad Miller, D-N.C., who introduced a bill Tuesday designed to ensure customers can easily switch banks, has gone as far as President Obama. He suggested the CFPB's job should be to ensure such fees are "transparent," and said the goal should be allow consumers to vote with their feet, not micromanage a bank's business.
"If you impose that fee or something else and your customers don't like it, they ought to be free to move their business," Miller said at a press conference. "If they have the market working the way it should, the way it works for every other business, that will do more to protect consumers than any regulation you could pass."
Obama and some others seem to have forgotten that banks are businesses: they are supposed to turn a profit. If B of A wants to charge customers a transparent $5 fee for a particular service, I don't think it's the business of the regulators, the CFPB or even the President of the United States to say that it shouldn't.
