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The senator who authored new interchange rules says that by imposing a $5 monthly fee on debit-card customers, Bank of America will be overcharging its customers.
October 3 -
Bank of America Corp., the largest bank by assets, plans to start charging its checking customers $5 per month, or $60 annually, if they use their debit cards to make purchases. The fees will go into effect early next year.
September 29
Bank of America Corp.'s plans to charge its customers for using debit cards will help boost the bank's credit card business, according to U.S. Sen. Dick Durbin, D-Ill.
B of A last week said it would start charging customers
Durbin said during a press conference Tuesday that B of A's goal in imposing the new fee is "to make debit cards more expensive" for consumers.
A Federal Reserve Board rule that went into effect on Saturday caps the debit-interchange rate for large banks at 21 cents per transaction plus a few cents to cover fraud and other costs. Previously, debit interchange for large banks averaged about 44 cents per transaction. The Fed's rules were required by the Dodd-Frank Act's Durbin amendment, which was written and named after the senator.
By charging customers a fee for using debit cards, B of A hopes to steer more consumers to use credit cards for everyday transactions because credit card interchange rates, which are not regulated, are higher and generate more income, Durbin said.
"If they can push people away from debit cards into credit cards, where it's unregulated interchange fees, they make more money," he said.
B of A representatives did not return calls seeking comment on Durbin's remarks.
When asked by reporters at the Tuesday press conference whether he plans to initiate any legislation to cap credit card interchange rates, Durbin said he is "not ruling out anything at this point" but said there is no pending legislation on credit card interchange.
Separately, the Washington, D.C.-based Retail Industry Trade Association this week reportedly said it plans to lobby for new credit card interchange regulations. Representatives from the association were not immediately available for comment.
Durbin's press conference came a day after he blasted Bank of America and on the Senate floor, telling customers to "
Durbin said that based on B of A's own calculations about the impact of the new rules, the Charlotte-based bank will bring in twice as much revenue from the $5 monthly fee as it loses from lower transaction fees.
"I'm calling on [chief executive Brian] Moynihan to justify this (new) fee," Durbin told lawmakers.
Durbin also sent a letter to Illinois-based banks and credit unions on Tuesday urging them to "seize this competitive opportunity" and step up to provide services for consumers looking to move their deposit accounts from the largest banks to smaller financial institutions.
Networks Visa Inc. and MasterCard Inc. have adopted two-tiered debit-interchange rate systems, exempting institutions with less than $10 billion in assets from the Fed's new, lower debit-interchange rates, the letter notes.
Durbin assured the smaller banks that he plans to stay alert to any attempts by Visa and MasterCard and large banks to "adjust rates over time in a way that diminishes the ability of smaller institutions to issue debit cards."
