It appears the customer has won the fight about debit card fees, but Colorado banks could lose millions, said Don Childears, Colorado Bankers Association president and CEO.
This week, the Associated Press reported that Bank of America Corp. is scrapping its plan to charge a $5 monthly fee for debit card purchases after outraged customers threatened an exodus.
The change in heart comes as customers across the country petitioned the bank and mobilized to close their accounts in favor of credit unions and community banks, the AP reported. The outcry prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel trial tests of their own debit card fees.
“This is the way the system works – competition determines what will happen in the marketplace, and this case, consumer demands won out,” Childears said. “Unfortunately, government price controls are now forcing banks to sell their debit card services to big box retailers for less than what the service actually costs.”
The scandal over debit card fees is directly related to the regulation that caps the fees banks can collect from store owners when customers swipe their debit cards – something that generated millions for banks.
The regulation, part of the Durbin amendment to regulate the finance industry, led banks to increase other banking fees, including monthly debit card fees, to make up for the losses. The regulation has had watch dog groups crying foul.
“The Durbin amendment was forced into law despite repeated warnings from consumer advocates, regulators and economists on the dire consequences that await consumers,” said Trish Wexler, spokeswoman for The Electronic Payments Coalition.
In September, Bank of America announced it would charge $5 monthly fee starting in 2012 for use of its debit cards.
CBA supports a move in Congress to repeal of the Durbin amendment. Childears called the cap on fees price fixing on a business-to-business service and government interference that results in banks losing money on every single swipe of a debit card.
“Colorado banks alone will lose $250 million in revenue annually,” he said. “Sadly, this money is directly transferred to big box retailers, who have yet to pass along the savings to their customers. Consumers should now rally against big box retailers and demand price reductions – something that was promised by proponents of this legislation.”