According to officials in the banking industry, Congress has made things so difficult for the industry to keep its debit card services afloat, consumers are now paying the price.
The Dodd-Frank Act became law in July 2010, and included an amendment by Sen. Dick Durbin (D-Ill.) entitled the Durbin Amendment, said Spokesman David Oliver, of the Georgia Bankers Association. The amendment requires the Federal Reserve System to set a fixed maximum rate for each debit card transaction, for large banks and card users.
This occurred on July 29, he said. The government capped the merchant fee per purchase at 21 cents. Before, the average fee was 44 cents, he explained. Banks were able to charge a lower or higher price than the average, however.
Banks are reacting to replace revenue and recover costs that have been regulated or legislated away from them, said Oliver. Some are choosing to begin including a monthly charge for customers to use their debit card.
The Federal Reserves new price cap took effect on Oct. 1, he said. The fee is really a result of direct congressional action, he added.
The debit card usage fees allow banks to compensate for the revenue that has been taken away from them, said Oliver. The industry, he said, is losing billions and billions of dollars due to this new price cap. There is a tremendous cost associated with providing debit card services to customers, according to Oliver. These costs include technology, maintaining systems, fraud protection, staffing and legal compliance, he said.
For little or no charge, people get security, 24/7 access, multiple payment methods, easy tracking of transactions, and in many cases, earn interest, he said. By comparison, it can cost a bank up to $200 to open a new account and [$250, to $300] a year to maintain a checking account.
Raj Date, special advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau, said checking account fees need to be transparent for consumers. Making the costs transparent is good for consumers and good for competition, he said. It allows consumers to compare the checking account options from large banks, community banks and credit unions, and pick the one that works best for them."
Colleen Haggerty, spokesperson for Bank of America, said, for the last couple of years, the financial institution has been more committed to providing transparent fees to its customers. She said the debit card usage fee is $5 a month, and will be rolling out in early 2012. Customers impacted by this fee will receive a letter notifying them 30 days before its effect.
Again, our goal is to ensure that we are clear in our communications with customers about our fees, and we have structured our products so that customers understand what they are getting and how much it costs, she insisted.
Haggerty said the fee will allow Bank of America to continue to provide its debit card services and conveniences. Some of these services include fraud protection, overdraft protection, record-keeping, fraud monitoring and savings programs, she said.
Customers who value debit's features and convenience can choose to use their debit cards by paying the fee, she said. Customers who don't want to pay this fee can continue to access their checking accounts to get cash from ATMs, through online bill pay, and increasingly, through their mobile phones and with [peer-to-peer banking] transfers.
She said there will be no fee for customers who dont use their debit card for purchases in a given month.
On the contrary, Wells Fargo & Company is currently evaluating this method in several states, including Georgia, Washington, Oregon, Nevada and New Mexico, said Jay Lawrence, spokesman for Wells Fargo.
He said testing began this month. Wells Fargo will automatically withdraw $3 a month from checking accounts of customers whove use their debit card for purchases. He said, as of yet, he is not aware of when testing will cease.
The rules have changed for us and other banks, he said. We are losing money, we are losing every quarter. He said Wells Fargo is losing about $250 million in revenue, and the debit card usage fees will only help regain half of that.
Lawrence said there are ways customers can avoid the fee, which include using ATM machines for transactions or using a credit card for purchases.
Some credit unions are using marketing campaigns that take advantage of the new fees by other banks, to lure customers into their doors. The Delta Community Credit Union will hold a Switch Day event on Oct. 21 at its 22 Metro Atlanta branches, said Delta Community Spokeswoman Kelly Ronna. She said the event will showcase the credit unions most popular products, which include free checking accounts.
Those who open a checking account will enjoy free online banking, mobile banking, automatic overdraft protection and no monthly check or check card fees, she said.
Georgia Bankers Associations Oliver said though most credit unions are not charging for debit card usage, that may change.
Credit unions may have to make changes in the future, he said.