A Disputed Charge
Bank of America (B of A) and its failed plan for a debit service charge fee that would have been put in place in January 2012, created an outrage in communities across the country. A Bank of America based in Charlotte, N.C. was the first to announce the service charge in September 2011. Customers of B of A would have to start paying $5 a month just to use their debit cards. One of these customers was a lady named Molly Katchpole. Katchpole, a 22-year-old resident of Washington D.C, decided to create an online petition. This petition asked B of A to cancel its plans for the monthly debit fee. In less than a week, the petition had 100,000 signatures and after a month the petition held 300,000 signatures. This was a big enough response for B of A to cancel the charge. JP Morgan Bank was already charging a $3 fee for debit card users as of March 2011. Wells Fargo was planning to test a debit service fee as well, but when Bank of America canceled their plans for the fee, all other banks followed.
The reason banks claim they needed to charge these fees is because of revenue they have lost due to new legislation passed that put a cap on the interchange income. This new legislation was the Dodd-Frank’s Durbin Amendment, which went into effect Oct. 1. Interchange income is revenue acquired by banks when a customer uses a debit card at major retailers; the retailer is required to pay an interchange fee to the bank. The interchange being the money transferred electronically from the bank of the customer to the bank of the retailer. For merchants the cap is now at 21 cents per transaction. Before the amendment, debit card companies charged retailers an average interchange fee of 44 cents per transaction. With the cap on the fee the banks are making less income from the interchange yet they still have to offer the service. A way to offset the revenue they are losing was to charge the proposed service fee.
The banks needing money to bring steady profit to their stockholders is not the issue with this charge. The issue comes from where banks are looking to make up for their lost revenue. They planned on charging this fee to college students and low-income families. The Advantage customers of Bank of America would have been exempt from this fee. For an individual to be exempt from the service charge at B of A, they must be a “Premium Package Customer” and have at least ten thousand dollars in their savings account or have a mortgage with the bank.
Puneet Kalia, a 37-year-old former vice president of Wells Fargo bank stated, “There are always customers who are exempt from service charges of all sorts, banks have high net worth individuals, it is a combination of all sorts: investment, deposits, and loans but there are only a few privileged ones.” As the majority of individuals are not “Premium Package Customers” and would be responsible for paying the $5 a month fee, Bank of America would have lost many people who bank with the corporation. Many took their money out of B of A and refused to bank there if the fee was not canceled. If B of A decided to charge the fee in January, they would have lost a majority of their customers. When Bank of America was asked to explain the service charge and why they canceled it, they would give no comment. Any one with questions is given a customer service number to call.
Even with the charge being canceled, there are many people who still are deciding to leave major banks and go to companies that are more local, like credit unions. Elizabeth Hadler, the 30-year-old marketing manager at Great Basin Credit Union, has seen a major increase in applications to the local credit union of Washoe County. “ Great Basin Federal Credit Union started seeing people come in right after the announcement on September 29th, the day Bank of America announced their fee. From the time of the announcement, in around a month, we opened 336 new accounts.” Around the same time last year only 137 new accounts were opened.
People are not just angry because they would have had to pay this fee, but they are angry because they believe corporate banks are greedy and are not in business for the majority of their customers, the middle class. It seems “big” banks are more concerned with profits for their shareholders than the proper treatment of the majority of their customers. Why are the middle and lower class asked to raise revenue for banks, when they are struggling themselves?
Also, it seems that Bank of America was not making it clear to the public who would be exempt from paying the fee. When residents of Reno, NV were asked if they knew about the people who would be exempt from the fee, most were not aware but at the same time were not surprised. Paige Pulley, 22, a student at the University of Nevada, Reno (UNR) and a customer at B of A had no idea that the fee would be waived for the privileged customers of the bank. Although, she was not shocked that a corporation like B of A would do that. She didn’t understand why the people struggling the most are asked to help gain revenue for “big banks”. She discussed her thoughts on the exempt customers of the bank, “They are the ones who can actually afford a $5 dollar per month charge and wouldn’t even blink about it. To some people that just is not feasible and it seems crazy for those people to be the ones targeted with charges like this.” When asked if she would be leaving Bank of America, she stated, “ No, I would have though, if they had not repelled the charges.”
The future for big banks, like Bank of America, is uncertain. The charge is canceled now but that does not mean the banks are not looking for other ways to increase their revenue. As Kalia says “ Banks will just find new ways to make up for losses, with hidden fees and charges that are less noticeable.” Luckily, people have other options and with the power of the masses in the future it is possible that customers will not have to deal with corporate banks, unless it is on their own terms.
SUSSANA, KIM, and MATT GUTMAN. “BANK OF AMERICA CANCELS $5 FEE.” ABC NEWS. (2011): n. page. Web. 17 Dec. 2011.
“Credit Card Processing.” Wikipedia. (2011): n. page. Web. 17 Dec. 2011.