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Durbin Saga: Banks Reconsider Fees [2023 Update]

Posted: November 2, 2011 | Updated: February 8, 2023

The Official Merchant Services Blog brings you a breaking news story following the ongoing aftermath of the Durbin Amendment legislation. Yesterday, Bank of America announced it was going to cancel its $5 monthly debit card fee plan. This falls in line with similar announcements from Sun Trust, Regions Financial Corp., JP Morgan Chase & Co. and Wells Fargo all stating they were no longer going to test monthly debit card usage fees at all.

As previously reported, there has been a staunch amount of criticism and backlash against Bank of America after it announced it was going to charge customers a $5 monthly fee to simply use their debit card. The bank was one of a group of banks gearing up to charge fees for debit card usage, all in a response to a debit card swipe fee cap that was instituted by the financial reform legislation in the Durbin Amendment. This reaction was predicted by Host Merchant Services earlier in the year when the company analyzed the Durbin Amendment and its potential impact.

As reported by The New York Times yesterday: “Bank of America blinked on Tuesday. The bank, the nation’s second-largest, said it was abandoning its plan to charge customers a $5 fee to use their debit cards for purchases. Only a month earlier, the bank had announced the new charge, immediately setting off a huge uproar from consumers.”

Primary Target

Bank of America became the most high profile target of consumer backlash and had a polarizing effect throughout the media on this issue, thrusting the Durbin Amendment and big banks firmly into the spotlight. Part of what made Bank of America the primary target for the Durbin Amendment stories was that they were the only bank that declined to test the fees, deciding to just add the fee starting in 2012. Another part that made Bank of America a target was their position as the leading bank in terms of debit card transactions. And finally, Bank of America made such a tantalizing target because of its history with receiving federal bailout money and their foreclosure practices which caught the attention of the Occupy Wall Street protest movement.

As reported in a Business Week article: “Bank of America Corp. is scrapping its plan to charge a $5 monthly fee for making debit card purchases after an uproar and threatened exodus by customers.The about-face comes as customers petitioned the bank, and mobilized to close their accounts and take their business elsewhere.”

You can review much of that saga in Host Merchant Services own Countdown to Durbin blog series.

Last Bank Standing

And while the customer outcry and criticism was certainly a factor, it’s also worth noting that Bank of America came to this decision after all the other major banks backed off fees. As reported by the New York Times: “Despite an outpouring of complaints online and at branch offices, the bank had remained steadfast in its plans until last Friday, according to a person briefed on the situation, planning to ease just some of the conditions for avoiding the fee. But over the weekend, after two major competitors — Wells Fargo and the nation’s largest bank, JPMorgan Chase — said they were backing away from their plans to levy similar charges, two high-ranking Bank of America officers recommended to Brian Moynihan, the bank’s chief executive, that the bank simply drop the fee.Then, on Monday morning, when SunTrust, a regional bank in Atlanta, said that it, too, would abandon its $5 charge, Bank of America was left standing alone, the last major bank planning the fee. The announcement came on Tuesday.”

And also reported by Business Week: “The outcry had already prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel tests of similar debit card fees last week. SunTrust Banks and Regions Financial Corp. followed suit on Monday.”

What Next?

This move by the banks, however, leaves them still searching for a way to offset the losses that the Durbin Amendment and other financial reforms are going to force onto them. The New York Times article suggests: “Now that all the large banks have decided not to impose the debit fee, experts said, they will find other ways to fill the hole. ‘Those revenues paid for a lot of things,’ said Joe Gillen, chief executive of Pinnacle Financial Strategies, a bank consultant in Houston.

Now, he said, consumers can expect more fees over time. ‘It will be slow and gradual, but they will bring those revenues back,’ Mr. Gillen said.”

And the Business Week Article stated: “In particular, banks in the past year have blamed their fee hikes on a new federal regulation championed by Senator Dick Durbin of Illinois. The law, which went into effect last month, caps the amount banks can charge merchants whenever customers swipe their debit cards. JPMorgan has said it would lose $300 million each quarter as a result of the regulation; Wells Fargo said it would lose $250 million a quarter.”

The Official Merchant Services Blog will continue to keep you updated on all aspects of the Durbin Amendment. With the banks backing off of their proposed fees, it looks like the next development may hinge on the viability of the October 14 bill introduced into Congress to repeal the Durbin Amendment.

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