Debit Card Fees Under Justice Dept. Review
The U.S. Justice Department is conducting an antitrust review of statements and actions by banks and their trade associations about imposing fees on customers who use debit cards.
Assistant Attorney General Ronald Weich described the review in a letter released today by Representative Peter Welch, a Democrat from Vermont, who had requested an investigation.
“Please be assured that if it finds that individuals, banks or other parties may have violated the antitrust laws, the department will take appropriate action,” Weich wrote in the letter, dated Nov. 16.
Bank of America Corp. (BAC) said on Nov. 1 that it wouldn’t charge debit-card users $5 per month, four weeks after the firm’s announcement of the fee sparked a backlash from customers and lawmakers. JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) had previously dropped plans for such charges.
Welch was among five House Democrats who last month asked Attorney General Eric Holder to investigate whether U.S. banks and their trade groups colluded on whether to impose fees in response to caps on what they can charge for using debit cards.
“While big banks like Bank of America beat a hasty retreat on their debit card fee strategies, I have no doubt that they will continue their quest to dig deeper into the pockets of struggling consumers,” Welch said today in a statement. “As they consider their next move, they should be aware that there is a cop actively on the beat.”
The Federal Reserve, acting on a provision of the 2010 Dodd-Frank Act, imposed rules on Oct. 1 limiting fees card networks charge merchants to 21 cents per transaction, about half what retailers had been paying. In response, lenders including Bank of America and Wells Fargo considered new charges for debit customers to make up some of the $8 billion the largest banks may lose under the rules.
Bank executives and the trade groups representing the industry said during debate over the fee caps that lenders would need to raise other charges on debit-card users.
“The harm will fall largely on consumers; banks will be forced to lose money on debit interchange transactions and likely will compensate by increasing fees in some way for deposit customers,” JPMorgan Chief Executive Officer Jamie Dimon wrote in an April letter to shareholders.
Bank of America’s fee announcement sparked a backlash from customers, criticism from lawmakers and a rebuke from President Barack Obama. The Charlotte, North Carolina-based bank reversed course in November after SunTrust Banks Inc. (STI) and Regions Financial Corp. (RF) decided to eliminate their check-card fees. Wells Fargo and JPMorgan canceled plans for fees and Citigroup Inc. (C), U.S. Bancorp announced they wouldn’t impose new charges.
Tom Kelly, a spokesman for JPMorgan, and Anne Pace, a spokeswoman for Bank of America, declined to comment on the letter. Lisa Westermann, a spokeswoman for Wells Fargo, didn’t immediately have a comment on the review.
Trish Wexler, the spokeswoman for the Electronic Payments Coalition, a trade organization that represents lenders like JPMorgan, Wells Fargo and Bank of America, also declined to comment.
John Berlau, director of the Center for Investors and Entrepreneurs at the Competitive Enterprise Institute, a free- market policy group, said today that the banks’ actions demonstrate they weren’t price-fixing.
“The fact that Bank of America dropped the debit card fee due to competition from other banks and credit unions, shows there was no conspiracy -- just different responses to the massive new costs of the price controls in the Durbin Amendment,” Berlau said.
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