U.S. Sen. Dick Durbin, D-Ill., took to the Senate floor yesterday in an impromptu attack on the $5 monthly fee Bank of America Corp. announced last week, demanding that BofA CEO BrianMoynihan justify the new fee, which kicks in next year.
BofA joins a growing number of banks that have announced plans to test or impose monthly fees for debit customers as a result of new, lower debit interchange rates the Federal Reserve Board established as a result of the Durbin amendment to the Dodd-Frank Act that went into effect Oct. 1.
Citigroup Inc. also has announced a new, higher fee for one of its checking accounts but did not impose a debit card fee.
Durbin claims that BofA’s new fee will generate far more revenue than the issuer likely will lose from reduced debit-interchange income.
BofA originally projected the Fed’s policy would cost the bank $2 billion a year if debit rates were capped at 12 cents per transaction, Durbin said. But the Fed’s final rules capped debit interchange at 21 cents per transaction plus a few pennies to account for fraud, which should have mitigated BofA’s projected losses.
Durbin calculates that based on BofA’s existing debit card customers, the new debit interchange rates will only cost BofA $1 billion in lost revenues.
“I’m calling on Moynihan to justify this (new) fee,” Durbin said.
Citing BofA practices over the past few years that ran afoul of consumer advocates in its handling of mortgages and debit-overdraft fees, Durbin exhorted BofA debit customers to find another bank.
“Vote with your feet...Get the heck out of that bank. Find yourself a bank or credit union that won’t gouge you for $5 a month and still will give you a debit card that you can use every single day,” Durbin said.
Sen. Bob Corker, R-Tenn., who immediately followed Durbin to discuss other legislation, responded first to Durbin’s comments about BofA and debit fees.
“I think consumers across our country are beginning to see the first of many consequences to Dodd-Frank. ... Sometimes I think my friends across the aisle think money comes from the air,” Corker said. “When you price-fix something like the Senate did (with debit interchange) in Dodd-Frank, obviously it’s going to have consequences that have been laid out.”
It is “interesting” that retailers “are talking about all the profits and benefits they have received” from the new debit-interchange fees, Corker said. “At the end of the day, consumers will be paying the price; we’re already seeing that play out (with) BofA,” he said.
