Let's be clear on one thing: I don't particularly like Bank of America Corp.'s decision to charge customers a $5 monthly fee to use their debit cards. I understand it is losing revenue due to the Durbin amendment, and executives would prefer for customers to use their credit cards instead (where banks face no interchange restrictions).
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.
Speaking on ABC News on Monday, President Obama was asked whether the government should "put a stop" to fees like the one Bank of America is charging.
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.
