WASHINGTON -- In defense of the interchange-fee reform, assistant majority leader Dick Durbin (D-Ill.) criticized Bank of America's new debit-card fee--last week, the bank announced that it would begin charging a $5 monthly fee for use of a debit card--in a speech on the floor of the U.S. Senate and in a letter to Brian Moynihan, CEO of the nation's largest bank.
"Your bank has decided to impose a significant new fee on loyal customers who simply want to access their own deposited money through a card that your bank gave them and encouraged them to rely on. I challenge you to provide specific and credible data that justifies imposing this monthly card fee. If you cannot provide such data, I challenge you to do the right thing for your customers and reconsider your decision. Based on the data I have seen, your decision to charge this new fee cannot be justified by any reasonable measure," Durbin wrote.
"First, there is no evidence that your bank could not continue to offer debit cards profitably just with the revenue you will receive under the generous maximum interchange fee rates that the Federal Reserve has established. The Fed found that it costs a bank on average around seven cents to conduct a debit transaction, and likely far less for a bank with your economies of scale. Under the Fed's rule, you will be allowed to profit handsomely by collecting around 24 cents per transaction. Your decision to charge a new monthly debit fee is an overt attempt to make even more profit off the backs of your customers."
He added, "Second, I am aware that you and your industry seek to blame swipe-fee reform, which I drafted and Congress enacted, for your decision to raise fees on your customers; however, this justification does not add up. According to industry analysts your bank has 38.7 million debit cardholders. Assuming that these cardholders remain your customers and pay your new $5 dollar fee, Bank of America will make an estimated $2.32 billion annually from this fee--on top of the enormous profit it will already receive under the Fed's swipe fee rates. Yet you recently claimed in an [Securities & Exchange Commission] filing that the revenue impact of swipe-fee reform on your bank would be significantly less than $2.32 billion--even if the Fed had set a 12-cent cap rather than the 24 cent-cap they established. It appears that your new fee will result in windfall for your bank with swipe-fee reform as an excuse. I challenge you to prove otherwise."
Durbin concluded, "I know that every bank in America would like to keep the old swipe-fee system just like it was. But our nation's banks need to learn how to serve customers well in a competitive and transparent market environment. For years, Wall Street and the big banks have been playing by a different set of rules than Main Street, and it is time for that to stop."
Click here to read Durbin's letter to Moynihan.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.