Community Bank in southwest Florida is taking advantage of the recent PR nightmare large banks like Bank of America have created for themselves by instigating debit card fees. The $750 million-asset bank is offering to pay people $5 per month to open a checking account instead of charging for debit transactions. In just a couple of days, it's become the most successful promotion in the bank's two-year history, and the institution partly has the bad mood of consumers to thank.

"We've gotten dozens of account openings per day," says Trevor Burgess, CEO of the bank holding company, which introduced the $5 reward program on Tuesday.

Burgess is one of the founders of Community Bank, which has 17 branches in and around Manatee County. The bank has invested in troubled community banks in the region, which was hard hit by the real estate collapse.

Through a focus on personal, local service -- the bank takes deposits from local clients and makes loans locally -- Burgess says Community Bank has grown rapidly and has a high enough demand for new loans that it's able to actually pay people to open savings accounts. "The economics of this are the opposite of what they are for the big banks," he says.

Community Bank's not alone among smaller institutions in noting a change in consumer mood and a spike in activity since Bank of America announced it would charge customers who use debit cards for purchase. While B of A has taken most of the heat in the press, other large banks such as Wells Fargo and Chase are also testing similar fees. The large banks say the new fees are a result of economic conditions and interchange fee restraints from the Dodd Frank law.

Since community banks and credit unions aren't directly affected by the Dodd Frank law, they stand to benefit from any consumer anger over the new fees.

"The fees have really hit a nerve for consumers," says Cindy Cantrell, executive vice president of retail operations and marketing for Bank of Tennessee, a $656 million-asset community bank based in Johnson City, TN, who says the bank's call center has been "inundated" and that a lot of the bank's employees are getting calls from people they know asking about debit fees. "We've had a lot of people come into our [branches and offices] to make inquires as well."

Credit unions have also reported a spike following B of A's announcement.

"This interest is coming from people who are upset with their bank, whether B of A or one of the other big banks," says Mark Wolfe, a senior vice president for the Credit Union National Association, who says many of the group's members are reporting a surge of inquiries and new memberships since the B of A announcement. "One credit union executive characterized it as 'the opportunity of a lifetime for us.' Some credit unions tell us they are seeing 20, 40, 50 percent and even triple digit percentage growth in new accounts over typical levels."

For example, since the announcement, LA Financial Credit Union says it has seen requests for membership skyrocket. The credit union, which is open to anyone who lives or works in Los Angeles County, says it received 175 applications in the two weeks following the B of A announcement, compared to 27 in the same period in 2010.

In a statement, Renee Mackanin, a vice president at the credit union, said the credit union "sent an email blast and letter to members reassuring them that we still offer free checking and will not institute debit card fees. The positive response has been overwhelming."

There's also a boom emerging for technology that enables faster account openings. At the BAI conference, BECU, for example, mentioned that online account opening helped it accommodate an influx of new members following the B of A announcement.

Cassandra Brown, an avp for the Credit Union of Atlanta, says the credit union will begin offering online account opening in 2012 to accommodate a spike in new members, and it is also expanding its mobile banking capabilities to serve members who are coming in from banks. "We've grown $4 million in assets since the end of August. That's unusual for us," Brown says (the credit union has a total of $71 million in assets).

Brown says concerns over new transaction fees charged by large banks, including for debit transactions, are playing a role in the uptick in new members at the credit union. "People are saying they are making a 'run' on their bank," she says, adding there's been notable migration from Wells Fargo (the Atlanta CU shared a footprint with the former Wachovia Bank, which was purchased by Wells Fargo during the banking crisis) in anticipation of that bank charging debit fees. "We're also getting a larger share of our existing members' purses" as people consolidate various bank accounts into the credit union because of concerns over fees.

To support its spike in new members, LA Financial offers online account opening, online loan applications and home banking with free bill payment. It also plans to rollout its mobile banking product by the end of the year, Mackanin said.

CUNA's Wolfe says that on a new web site the trade group launched earlier this year to help consumers find a credit union they're eligible to join, www.aSmarterChoice.org, "we have seen traffic double its normal levels during the last two weeks. From September 29 to October 9, about 36,000 visitors came to the site. Over the past seven months, monthly visits averaged about 16,500."

Wolfe also says a separate Facebook page that the group launched for aSmarterChoice received 2,000 friend requests during the same period, bringing the total to 3,263, up from 1,014 on September 29.

"A number of credit unions are adjusting their marketing strategies to reference this wave of consumer dissatisfaction with banks and re-emphasize the better deal and lower fees they're offering," Wolfe says.

One such example is Co-op Services Credit Union, a 52,000-member credit union in Livonia, MI, that is offering people the chance to "shred" their bank debit cards in protest of debit fees and receive $105. Called ShredMyCard.com, the website was launched as part of a marketing effort to tap consumer frustrations over fees.

Madeline Aufseeser, a senior analyst for Aite, says the short-term spike in new accounts for credit unions and community banks has a chance to be a longer-term opportunity for smaller institutions, provided the institutions can offer services that add value to the zero-debit fee environment.

She also says that some of the economic pressures that are leading the larger banks to charge for debit fees could eventually spread to community banks and credit unions in time. A reduction in interchange revenue, whether it comes from regulatory pressures or not, would also make it tough for smaller institutions to support unprofitable consumer accounts.

"[CUs and community banks] are not subject to the [regulatory] rate cap," Aufseeser says. "However, since merchants have the choice in routing transactions, they will likely take the path of least resistance. Because of that, the margins that the credit unions and community banks enjoy today will deteriorate over time."

A Bank of America spokesperson says the bank's debit card fee is a flat fee that will start next year, that it will only impact the use of debit cards for purchases, and that the bank will notify people in writing 30 days before the assessments begin. The bank is also dispatching customer service reps to discuss the value of debit cards.