Wells Fargo & Co., the fourth-largest U.S. bank by assets, canceled plans to charge a $3 monthly fee for using its debit cards after customers in a five-state pilot program opposed the charge.
Customers in Georgia, Nevada, New Mexico, Washington and Oregon will not be charged the fee that was set to appear on account statements starting Nov. 15, Lisa Westermann, a bank spokeswoman, said yesterday in an e-mail.
“As we adjust to changes in our business, we will continue to stay attuned to what our customers want,” Ed Kadletz, head of the bank’s debit and prepaid card business, said in a separate statement. “This means understanding their needs.”
Banks are trying to recoup fees capped by the Durbin Amendment, part of the Dodd-Frank financial overhaul, which limits the amount lenders can collect from retailers for processing transactions. Wells Fargo, based in San Francisco, has said the fee caps will cost about $250 million a quarter in lost revenue and that it will try to recoup half of the amount through other volume and product changes.
Bank of America Corp. has said it will charge customers a $5-a-month fee, which sparked objections from critics including President Barack Obama. Five House Democrats asked Attorney General Eric Holder on Oct. 13 to investigate whether banks and their trade groups colluded on decisions to impose new fees.
U.S. Senator Richard Durbin, the Illinois Democrat for whom the amendment is named, challenged Wells Fargo’s decision to charge new fees to debit-card customers, citing the record profit posted by the bank in the third quarter. In a letter to Chairman and Chief Executive Officer John Stumpf, Durbin faulted the bank for its plan.
“It is disingenuous for banks to claim they are somehow entitled to make up reductions to a revenue stream that they never would have received in the first place in a transparent and competitive market,” Durbin wrote in an Oct. 19 letter. Durbin also sent a letter to Bank of America.
The new rules cap the fees at 21 cents, plus 5 basis points of the total and a conditional 1 cent for fraud-prevention, replacing a formula that averaged 1.14 percent of the purchase price, or about 44 cents. The limits may reduce annual revenue at the biggest U.S. banks by $8 billion, data compiled by Bloomberg Government show.
Wells Fargo is trying to “find the right balance” between doing what’s best for customers and shareholders, Stumpf said in an Oct. 21 interview with CNBC.
Representative Brad Miller, a member of the Financial Services Committee, introduced a bill this month that would bar all banks from imposing fees on people who close accounts. He called the proposal a response to Bank of America’s plan and said it would allow customers to switch banks without being penalized.