Few things have been as unpopular lately as the announcement by Bank of America that customers would soon be charged $5 to use their debit cards. The nominal fee became symbolic of corporate greed and fueled a backlash that got the attention of Occupy Wall Street, Congress members and even the President of the United States.
More than 300,000 people signed an online petition urging the bank to retract the fee. Rep. Peter Welch (D-Vt.) called for a Justice Department investigation and Sen. Dick Durbin (D-Ill.) told Bank of America customers, “vote with your feet. Get the heck out of that bank.” President Barack Obama said the move was “not [a] good business practice.”
Wells Fargo, Chase, Regions and SunTrust got the message and announced last week that they would do away with their fees. And today, Bank of America announced that it will abandon the proposed fee as well.
Consumer advocates heralded the decision as a victory for the little guy. Pedro Morillas, legislative director for Cal Pirg (California Public Interest Research Group) told Patt Morrison that “Bank of America didn’t cancel the fee because they wanted to. They canceled the fee because consumers voted with their feet and expressed their displeasure by taking their money and moving it.”
Morillas said “now consumers really know there are better choices out there, like credit unions and community banks that, from our research, essentially charge fewer fees and are better for consumers.”
Diana Furchtgott-Roth, senior fellow at the Manhattan Institute and a contributing editor of RealClearMarkets.com, said the biggest pressure came from other banks who are not charging the same fee. “We have a competitive market. Bank of America knew that it could not sustain this $5 per month debit card fee because consumers would easily switch to other banks, so they dropped it.”
Morillas says the financial regulatory reform worked: “Banks were forced to disclose their fees to consumers, and not hide them in places like swipe fees. And now consumers are able to make a real choice about exactly what they’re paying for and exactly what they’re getting for their money.”
Is this a free market victory for the consumer, or is it only a matter of time before the banks figure out substitute fees or lower the interest paid on accounts? Do banks have the right to charge debit card fees?
Pedro Morillas, legislative director, CALPIRG, California Public Interest Research Group
Diana Furchtgott-Roth, senior fellow, Hudson Institute, where she directs the Center for Employment Policy; former chief economist, U.S. Department of Labor under President George W. Bush.