Digital Transactions Authoritative, insightful and timely information for payments professionals
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U.S. Sen. Richard Durbin its ratcheting up the pressure on Bank of America Corp. by launching what he calls his “No Way BofA!” e-mail campaign urging consumers to protest the bank’s planned $5 debit card fee by e-mailing chief executive Brian T. Moynihan.
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Durbin, the Illinois Democrat who sponsored the debit card interchange price controls that took effect Oct. 1, strongly criticized BofA’s fee when it became public last week and urged consumers to shop for friendlier terms from smaller financial institutions. The fee would charge some cardholders $5 for each month that they use their debit card for purchases. The fee launched a thousand negative press stories and even drew the attention of President Obama and Vice President Joe Biden. But Durbin’s e-mail campaign, which apparently began on Monday, brings modern electronic-communications weapons into the battle.
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Digital Transactions News obtained a copy of a “No Way BofA!” e-mail sent to a supporter of Democratic causes. The message has a pre-written, three-sentence letter to Moynihan that begins, “I am outraged at your decision to charge customers a $5 monthly fee just to access their own money with a debit card.” The letter claims that it is “unacceptable to pad already excessive profits on the backs of hard-working Americans” and urges Moynihan to cancel the fee. Senders must fill in their names and e-mail addresses before clicking on a send button that apparently forwards the message to BofA.
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It’s unclear how many consumers have sent the letter so far. Spokespersons for Durbin and BofA did not respond to Digital Transactions News requests for comment Monday. Durbin’s e-mail references an e-mail campaign he organized in 2007 to stop oil giant BP from discharging into Lake Michigan what opponents said would be toxic waste from an expanded Indiana facility.
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Brian Riley, senior research director for bank cards at Needham, Mass.-based TowerGroup, says he’s “no fan” of BofA’s fee but has this to say about Durbin’s tactic: “I really think that’s horrible, taking a pretty aggressive stance against a business … I think it’s a little too specific. You’d expect he’d be a little more neutral.”
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Riley says that Citigroup Inc., which is planning to double to $15 the monthly fee on some checking-account holders, has not received nearly the negative publicity that BofA has. “For all the attention BofA has gotten for that, I’m wondering why everyone isn’t all over Citi,” says Riley.
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Other big banks are testing some debit card usage fees in local markets, while others are slapping on new checking fees. The rationale is that new government regulations are limiting revenues that have to be recovered elsewhere. Banks cite the Durbin Amendment to 2010’s Dodd-Frank Act, which caps debit card interchange for issuers with more than $10 billion in assets, and earlier regulations cracking down on overdraft charges.
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Riley, who is preparing a report about how big debit and credit card issuers should assess the new business environment, suggests that banks look at their own card mix very carefully before imposing new card or checking fees. Some banks, such as Wells Fargo & Co., which generates more than 75% of its purchase volume from debit cards, are much more affected by Durbin than are credit-leaning issuers such as Citi or Capital One Financial Corp., the latter of which gets about 90% of purchase volume from credit cards, he says. BofA is the nation’s largest debit card issuer, with about 33 million cards outstanding, but it also has a big credit card file. BofA’s purchase volume thus is almost evenly split between credit and debit, he says.
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“As a result, Durbin will have a very different meaning to each of these issuers,” says Riley.
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Even with Republicans in charge of the House of Representatives, too many new debit and checking fees, he says, could spur politicians to return to the interchange issue with an election year looming and banks a convenient target in a weak economy. “I think that’s something the industry needs to be wary of here; it’s going to get people looking at credit interchange again, which is the big enchilada,” warns Riley.
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Retail groups whose members pay interchange are hoping for just such an outcome.
