Pressure on B of A Mounts as Rivals Ditch Debit Fees
The debit-card fee dominoes are falling, leaving Bank of America Corp. increasingly alone in its controversial efforts to make customers pay for using their debit cards.
SunTrust Banks Inc. and Regions Financial Corp. became two of the last remaining holdouts to cave on Monday, telling customers that they would discontinue their monthly fees and refund those customers who had already started paying to use their debit cards. The banks followed larger rivals Wells Fargo & Co. and JPMorgan Chase & Co., which both cancelled tests of similar fees last week.
That leaves Bank of America increasingly isolated in maintaining its widely-criticized fees. The bank is now likely to give customers more loopholes to avoid paying those fees — which many see as the first step in an inevitable backtrack of the entire plan.
"They're going to retreat. … Big companies don't like to be out there naked," says payments consultant David True.
A Bank of America spokeswoman declined to comment on Monday.
The bank announced its plans to start charging customers $5 per month in September, a few days before new federal rules took effect capping debit card interchange. Big banks had already been raising the prices on their basic checking accounts, in response to the regulations slashing the once-lucrative "swipe" fees they receive from merchants every time customers buy things with their debit cards.
Bank of America representatives were careful to point out the link at the time, saying, "The economics of offering a debit card have changed with recent regulations."
But that effort to make a political point in consumers' wallets did not go over well. Politicians all the way up to President Barack Obama blasted Bank of America for its decision, which came amid widespread, ongoing protests against Wall Street and the banking industry.
Bank of America's efforts to blame the government for its new fee "made them sound petulant about the regulatory changes, and I'm not sure petulance is ever becoming on a major corporation," says Campbell Edlund, president of EMI Strategic Marketing Inc.
"I don't think consumers have either a deep understanding or an appetite to understand either the regulations, which are complex, or their implications," she says.
Bank of America's refusal to retreat on debit fees also "puts them in the government crosshairs," says Jason L. Ware, an analyst with Salt Lake City-based Albion Financial Group. "They put themselves in a position where they could be the bad guys as far as the administration is concerned, which is a potential risk."