B of A Draws New Fire for Old Checking-Fee Test

When it comes to charging customers new fees, Bank of America Corp. is painfully learning that white lies might be best.

A front-page Wall Street Journal article on Thursday called new attention to B of A's efforts to revamp its checking account fees. Like its biggest rivals, B of A has spent much of the past year trying to figure out how to reprice its products, as new regulations take a bite out of checking account revenues.

Some of those tests have been planned for over a year — but this fall, B of A lost any ability to continue them quietly. The nation's second-largest bank in November retreated from a plan to charge its customers for using their debit cards, after being excoriated by angry consumers and politicians from President Barack Obama on down.

That plan, which the bank overtly linked to new regulations on debit card swipe fees, would have been extremely transparent about how B of A charged for its services. Ultimately, it was too transparent. The debit-card fee plan became the equivalent of telling consumers, "No, you don't look fat in that" — it made no one happy and ended up losing B of A many customers.

Now, as the bank continues testing a separate, long-running plan to restructure its checking account prices, even minor updates can land it back in the spotlight. On Thursday, a Massachusetts official slammed B of A for testing fees that would "burden" many of its customers.

"I don't think it's realistic for a bank of their size, scope and visibility to move in stealth mode … but it's hard to walk the tightrope between being high-profile and being transparent," says Campbell Edlund, president of consulting firm EMI Strategic Marketing.

The Journal on Thursday described what it called "sweeping changes" to B of A's checking account structure, although it and other news organizations had first reported many of those changes in January 2011. The bank is now training some branch managers to help roll out the changes and is still tinkering with how it will charge customers for the new accounts, according to the article Thursday.

But Bank of America still has not made any decisions on how it will ultimately revamp its checking accounts, bank spokeswoman Anne Pace told American Banker on Thursday.

"We have been testing in select markets for more than a year and plan to continue to learn from those tests," she said in an email, adding that all of B of A's current and future accounts offer customers ways to avoid fees.

The pricing structures that B of A is testing would follow in the more opaque footsteps of rivals including JPMorgan Chase & Co. and Citigroup Inc., which quietly compensated for the swipe-fee reform by changing the overall structure of their checking accounts. Bank of America has already dabbled in some of those strategies; in 2010 it rolled out an online-only checking account that was free unless and until customers wanted to receive paper statements or conduct business with a teller in person.

Such "bundling" strategies, which allow customers to waive fees only by forgoing certain services or by doing a certain amount of business at the bank, are becoming increasingly common, Edlund says.

"Tiered deposit products have been on the table for many of the banks, at least for all the large ones," she says.

Banks are bracing to lose several billions of dollars in annual revenue from the Durbin amendment to the Dodd-Frank Act, which went into effect in October and caps the fees that banks can collect from merchants every time consumers buy things with their debit cards. The law has squeezed the already-thin margins on checking accounts, which cost banks on average about $350 per year to maintain but only bring in about $270 on average in annual revenue.