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The Spectacle Blog
…it’s Congress. David Indiviglio at The Atlantic explains that Bank of America’s annoucement that it will institute a $5 fee on debit card accounts is a direct result of regulations in the Dodd-Frank bill.
The only thing surprising about this news is that anyone Congress was so blind to reality that they expected anything different. Did they really believe that banks would just shrug when their revenues declined by billions of dollars? Since they can’t get as much money from customers indirectly through debit interchange fees paid by retailers any longer, they’re going the direct route and charging customers for using debit.
And retailers won’t lower prices by a commensurate amount, meaning that lower-income folks will feel the pain:
As I pointed out on Wednesday, retailers aren’t cutting prices. Instead, they’re pocketing the $7 billion or so they’ll save in fees. While this could theoretically change in the future, they have indicated that they aren’t cutting prices at this time.
So customers will end up paying more than they did before once this new law goes into effect, but not because the banks are creating a “new” fee, but because the government forbid them to make full use of their old one. This financial regulation effort will amount to a gift to retailers, courtesy of Congress.
As I also pointed out, in particular, this action by Congress will hurt low- to middle-income Americans more than wealthier Americans. Banks find it very important to cultivate relationships with their wealthier customers, because they want their high deposits and to sell them other financial services. So banks’ wealthiest customers will likely escape fees like this. Instead, less affluent Americans will end up paying more than their fair share.
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More Blog Posts by Joseph Lawler
http://spectator.org/blog/2011/09/30/its-not-bank-of-america-chargi
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Kevin| 9.30.11 @ 11:16AM
I imagine most people, or at least the smart ones, rather than paying this fee will just go back to writing checks. I've never worked in banking but I would imagine that processing checks has to cost more than processing an electronic debit transaction. It seems this would also be more costly, and risky for the retailers as well. Overall it sounds like a lose-lose proposition for everyone.
LiveFreeOrDie| 9.30.11 @ 11:29AM
Every regulation designed to steal money from banks and business will always be passed on directly to the consumer in the form of higher rates to borrow money, lower rates on investment accounts, higher prices and of course, fees. The banks will gladly pony up "their fare share" right after they collect it from us.
Jen| 9.30.11 @ 11:33AM
I can't go back to writing checks- those cost $1 a piece. I use my debit card everywhere. I'm not affected by this fee yet, but my bank (Citibank) just told me I'll have to pay a hefty fee just to have an account. Looks like after 16 years, I have to switch banks. And that's a huge pain in the neck.
Sean| 9.30.11 @ 11:33AM
Bank of America was a horrible bank even before this fee. Their customers should just change banks. Personally I prefer using cash rather than debit.
Hunter| 9.30.11 @ 1:12PM
I run a business that accepts debit cards. I don't specifically charge my customers for the fees associated with using the cards, and so it is pretty hard for me to specifically lower the fee for them. It's a nice thought, but not really practical. Typical government thinking.
Brubaker| 9.30.11 @ 1:19PM
You're right. There was never any prospect of the reduced swipe fees being passed on to consumers. The was typical feel-good liberal government thinking: "We'll stick it to the evil banks," and never mind what collateral damage it causes.
Joe Citizen| 9.30.11 @ 1:47PM
Your argument is patently ridiculous. The fact that the new regulation is a reason why the banks raise their fee does not change the fact that the banks have chosen to raise their fee. They are not obliged to do so. The regulation does not demand they do so.
You are doing the bank's bidding in terms of trying to deflect blame from them, for their own actions, onto the government.
Lame and transparent.
Val| 9.30.11 @ 7:25PM
Know what happens when you call Bank of America, as I did a few minutes ago? Their customer service reps will give you a canned speech about how the news of the $5 fee was "leaked" to the press, who got it all wrong. BOA is STILL trying to figure out what happened, dang it! What's really going to happen is that sometime in 2012, the "legislature will review banking fees." Uh huh. I wonder how much those reps get paid to lie through their teeth.
Dee| 10.18.11 @ 4:04AM
On top of their greed, my son, who started working after graduating college went to cancel his debit card at BofA and transfer some of his money to his credit union, and BofA did not have enough to give him cash and told him he would have to pay $10 for a cashiers check (money orders cost the same). Across the street at CVS a money order costs $1. He has had this account since elementary school. They harrassed him about leaving and asked him why. He said he gets life time free checking and $50 to open an account. The cashier at BofA said isn’t our loyality to you worth $50? He said not when you are charging me $10 to take out my money when YOU are the one that does not have the cash. BofA has not changed since I graduated college – and I warned him about that when he wanted to set up the account. They charged my grandmother for currency exchange rate and money order when she sent me a money order for my wedding. BofA charged me again to cash it – like $50 and I said Never again. Now he has said NEVER again will he bank with BofA too. This is shameful and should be illegal. Not like he has thousands of dollars here.