There's Something Happenin' Here...: Bank of America Caves On $5 Debit Card Fee

It's like a scene in one of those war movies when someone jumps out of a trench to attack a machine gun and turns around to discover that no one is behind him. Ooops.

When all of your major competitors decide not to follow your lead on a bid to raise revenue, you know you have probably made a boo-boo. Bank of America defied the Treasury Department, the Federal Reserve, the President, the Senate and its own customers in a bid to stem the decline in profits brought on by new restrictions on all those creative financial innovations that enriched its executives at the expense of most of the rest of the country.

The bank evidently thought that with the conservative economic winds blowing at its back this was a no-lose proposition. But as the Buffalo Springfield sang in 1967, 'there's something happenin' here, what it is aint exactly clear.' Occupy Wall Street, against all odds, has captured the public imagination. The austerity meme originated by Republicans but embraced by Democrats, including the President, is out. A national consensus on the need for job creation is in.

JP Morgan, which surpassed BofA as America's largest bank this fall, quickly grabbed the opportunity to distinguish itself from its rival by saying no to debit fees. And this despite its Chairman, Jamie Dimon, being among the most outspokenly confrontational of the nation's CEOs. Virtually all of the other major banks followed Morgan's suit. Stories have begun to appear questioning the Republicans' ability to hold on to their majority in the House of Representatives, let alone capture the Senate or Presidency. Well, a three year old recession with declining job creation will do that to you.

The fee was a willful act of jut-jawed bravado, designed to rally the troops - and raise some revenue - in the face of withering attacks on the bank's effectiveness and, some would argue, legitimacy. It failed. 51,000 bank customers are reported to have switched from the 'Too Big to Fail' banks to other institutions since the fee was first announced. You can defy politicians from time to time, but you can not defy your customers and survive for long. JL

Rick Rothacker reports in Reuters:

Bank of America Corp is dropping plans to charge a $5 monthly fee for debit card use, the bank said in a statement on Tuesday.

The second-biggest U.S. bank said the move was in response to customer feedback and competition. Bank of America was under pressure to make the change as rivals backtracked from plans to charge customers for using their debit cards
"We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee," David Darnell, the bank's co-chief operating officer, said in a statement.

JPMorgan Chase & Co and Wells Fargo & Co last week decided to cancel test programs, while SunTrust Banks Inc and Regions Financial Corp said on Monday they would end monthly charges and reimburse customers.

Bank of America had planned to start charging customers next year. Banks began crafting the monthly charges to make up revenue lost to a law that slashes the fees they charge retailers when consumers swipe their cards. The fees sparked a firestorm of criticism from consumers and politicians, and many smaller banks and credit unions shunned the practice.

Bank of America began softening its stance on the fee last week. The Charlotte, North Carolina, bank planned to give customers more ways to avoid the charge, such as maintaining minimum balances, having a paycheck direct-deposited or using their Bank of America credit card.

The reversal is another embarrassing about-face for Bank of American CEO Brian Moynihan. This spring, he signaled plans for a modest dividend increase this year, only to have the Federal Reserve Board deny the request.