Legislators move to ban consumer debit fees

To recover revenue lost from the cap imposed on debit card interchange fees by the Durbin Amendment to the Wall Street Reform and Consumer Protection Act of 2010, several big banks have instituted new consumer fees. In response, a growing number of bank customers are reportedly moving their accounts to less expensive financial institutions, and federal and state legislators have proposed legislation to ban debit card fees.

Large financial institutions such as Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. introduced new checking and service fees in October 2011, when the Durbin Amendment went into effect. These banks now charge customers as much as $60 a year for using their debit cards.

Credit Union National Association spokesman Pat Keefe, whose organization represents 90 percent of the credit unions in the United States, said it will be a couple of months before CUNA will have data on how many new credit union accounts were opened in October, but his organization believes there is a movement of customers from the big banks to credit unions.

"We are hearing new account openings are up from 20 to 50 percent above where they were at the same period last year," he said.

Efforts to ban debit fees

Congressman David Cicilline, D-R.I., introduced H.R. 3190, a bill titled "To amend the Federal Deposit Insurance Act to prohibit insured depository institutions from charging consumers fees for the use of debit cards," on Oct. 13, 2011.

"After Wall Street greed drove our financial system to the brink of collapse, the big banks received a massive taxpayer-funded bailout to stay afloat," Cicilline said introducing the bill. "It is unconscionable that now these same banks are trying to reach into the pockets of hardworking American families in order to inflate revenues, bolster balance sheets and feed corporate excess."

On Oct. 17, 2011, Lake Worth, Fla., Representative Jeff Clemens introduced legislation to prevent banks from collecting debit card fees in his state. Clemens told The Green Sheet, "The banks have broken a promise with the American people, even if it is just an implied promise, that we will have free and easy access to our own money. They convinced us all to go to a cashless society, and now that we are there, they want to turn around and charge us for the convenience that they convinced us all would be free."

The Florida Bankers Association claims Clemens' legislation would interfere with federal banking regulations. Clemens dismissed the FBA concern by pointing to the 2009 U.S. Supreme Court decision in Cuomo v. Clearing House Act in which the court said the State of New York has the ability to regulate commerce in the state.

Differing perspectives

This fallout over the Durbin Amendment elicited a strong reaction from amendment sponsor Sen. Dick Durbin, D-Ill. In an Oct. 19, 2011, letter to Wells Fargo he noted the bank's third quarter profits were up 21 percent.

"It is certainly surprising that your bank would pursue this fee strategy in light of the consumer reaction that has been prompted by Bank of America's recent imposition of a monthly debit fee on its customers," he said. "Because Wells Fargo has not made publicly available any of its own cost or revenue data regarding debit transactions, I will inform you what the publicly available data reveals. … Wells Fargo will make at least an estimated $1.22 billion in annual debit interchange revenue after swipe fee reform."

In an opinion piece for Politico.com, Sen. Bob Corker, R-Tenn., wrote, "The Durbin Amendment should serve as a lesson to Congress and this administration that 'feel good' measures passed in a spirit of populism that cause politicians to pick industry winners and losers are often counterproductive. And the American people are left paying the price – literally."

Bank of America CEO Brian Moynihan told Bloomberg News on Oct. 19, 2011, the new fees are targeted at customers who use Bank of America's ATMs and online banking services but have their primary relationship with other financial institutions.

Both H.R. 3190 and Florida's HB 375 can be tracked using The Green Sheet's Legislative Roundup located on our homepage under Resources.

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