Bank of America Corp., the second-biggest U.S. lender by deposits, abandoned plans to charge $5 a month for debit cards after a nationwide backlash from consumers and lawmakers.
The bank canceled the fee, which would have started in January, after listening “to our customers very closely,” David Darnell, co-chief operating officer, said in a statement today. The lender also cited competitive pressure.
Bank of America reversed course after rivals including JPMorgan Chase & Co. and Wells Fargo & Co. decided against similar charges, leaving the Charlotte, North Carolina-based firm the only U.S. lender among the biggest five with plans to introduce the fee. Citigroup Inc. and U.S. Bancorp had already rejected the idea, while SunTrust Banks Inc. and Regions Financial Corp. eliminated their check-card fees yesterday.
“For a lot of consumers, this was the last straw,” said Jean Ann Fox, director of financial services for the Washington-based Consumer Federation of America. “Banks have been making a lot of changes to accounts, adding fees and raising the minimum balance needed, and consumers were clear that they objected to one more fee.”
Card issuers must seek other ways to replace revenue lost after the U.S. capped fees on debit-card purchases last month at about half the previous level. The limits, mandated by the Dodd-Frank Act, may cut annual revenue by $8 billion at the biggest U.S. banks, according to data compiled by Bloomberg Government.
Bank of America fell 6.3 percent to close at $6.40 in New York. The shares have dropped 52 percent this year, the worst performance in the Dow Jones Industrial Average and the 24-company KBW Bank Index.
Some of the largest chain stores backed the cap, and the Arlington, Virginia-based Retail Industry Leaders Association said in a statement today that the trade group plans to push for similar relief on credit cards.
Lenders will “find more subtle ways to make up for this lost revenue, increases that may fly under the radar,” said Bill Hardekopf, chief executive officer of Birmingham, Alabama-based research firm LowCards.com. “Banks may increase existing fees or raise the introductory interest rates on credit cards.”
Bank of America CEO Brian T. Moynihan, 52, had defended Bank of America’s plans, saying Oct. 18 that the debit-card fee would encourage customers to use more services with the company so they’d be exempt.
The charges had fueled demonstrations in Los Angeles and Boston and prompted a Washington woman to collect more than 300,000 petitions in protest. President Barack Obama criticized the moves as “not necessarily fair to consumers” and Representative Brad Miller, a North Carolina Democrat and member of the Financial Services Committee, introduced a bill last month that would make it easier to switch banks.
Last week, Bank of America managers considered adding ways customers could avoid the fee, including setting up direct deposits or using credit cards, said a person with knowledge of the lender’s plans. The company dropped the fee entirely after it became clear it was among the only firms that still planned to assess it, the person said.
“Consumers across America have a much larger voice in this process today than they did even a few weeks ago,” U.S. Senator Richard Durbin, an Illinois Democrat who pushed for the fee caps, said today.
Bank of America said Sept. 29 it would charge customers who used their debit cards for purchases if they had less than $20,000 in total balances or lacked a mortgage or Merrill Lynch brokerage account, drawing criticism that it would mostly hurt lower-income customers.
“The public backlash over debit-card fees should serve as a big wake-up call to banks that they can’t take their customers for granted,” Pamela Banks, senior policy counsel for Consumers Union, the advocacy arm of Consumer Reports magazine, said in a statement.