By Eileen Ambrose and Steve Kilar, The Baltimore Sun
November 2, 2011
Facing a consumer backlash and an online revolt, Bank of America said Tuesday that it won't adopt a $5 monthly debit card fee next year after all.
The move — which came after some banks had backed away from similar fees — is seen as a major victory for consumers, who stood together against what they saw as an unfair fee to access their own money.
"A lot of people do petitions," said Catherine Anderson, 30, a Bank of America customer in Baltimore. "Sometimes they work; sometimes they don't. It depends on the issue. But with this one where there was a sense of community … this was definitely a hot topic that needed to be addressed."
Bank of America, the largest bank in Maryland, planned to adopt the fee next year to make up for lost revenue, after the federal government capped what banks can charge merchants to process debit card transactions. Other major banks were expected to follow suit.
But the fee, unlike some others, touched a nerve with consumers. Experts said the swift reaction reflected consumers' frustration in dealing with foreclosures and high unemployment, even as banks appear to have recovered from the recession with the help of a taxpayer bailout.
"I wanted to drop" Bank of America, Savanna Elligson of Baltimore, a longtime customer, said Tuesday. Now that the company has dropped the plan, she plans to continue banking there.
The consumer victory is likely to be short-lived. Finance experts predict banks will make up the lost revenue by adding other fees.
Still, the consumer backlash against the debit-card fee was quick, and so was the reaction from some banks.
Wells Fargo & Co. and JPMorgan Chase, which were testing similar fees, abandoned plans to adopt them last week. SunTrust and Regions Bank announced this week that they were rescinding their debit card fees and refunding the money to customers.
Bank of America initially appeared willing to give customers more opportunities to avoid the fee, but Tuesday morning it backed away entirely.
"Bank of America backed down because it was a fee too far; it was a fee too high," said Ed Mierzwinski, a program director at the consumer advocacy organization U.S. Public Research Group.
In announcing its decision, Bank of America cited customer concerns and a changing competitive marketplace.
"We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee," David Darnell, co-chief operating officer said in a statement. "Our customers' voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so."
The National Foundation for Credit Counseling released the results of an online poll Tuesday, which found that nearly two-thirds of the 2,400 respondents said they would change financial institutions to avoid a debit card fee.
Indeed, competitors had been quick to seek advantage from what was viewed as a public relations blunder by some major banks. Credit unions, community banks and online institutions that do not charge debit card fees have been touting themselves as an alternative — similar to Southwest Airlines launching its "bags-fly-free" ad campaign after competitors adopted baggage fees to the outrage of many travelers. Southwest doesn't charge for the first two bags.
John Ulzheimer, president of consumer education for SmartCredit.com, said banks probably were surprised by the uproar.
"People don't generally complain for very long or very loud when someone puts a new annual fee for $79 on a credit card," he said. "But when you charge to get access to your own money, that's when people get really angry at you."
Ulzheimer said banks were wise to back off the unpopular fee, though consumers are still likely to pay a price.
"All [banks] have to do is increase ATM charges by a quarter or nickel" to recoup that lost revenue, he said. "A dollar is a dollar regardless of where it comes from. If it comes from a place that makes me less angry, that's a win for the bank."
But consumers' anger is real and is unlikely to dissipate until the economy and the job market improve, experts say.
"They have reached their breaking point. They are doing things they normally are not willing to do, like sleep in a park and move to another bank," Ulzheimer said, referring to the Occupy movement that has hit many cities.
Not since the anti-war movement in the 1960s have people been so stirred up, said Roland Rust, a marketing professor at the Robert H. Smith School of Business at the University of Maryland, College Park.
"You are seeing this tremendous wave of populism. You see it in the Tea Party on the right and the Occupy Wall Street on the left," he said, adding that the sides have similar complaints but far different solutions.
Brian Gunia, an assistant professor at the Johns Hopkins University's Carey Business School, said consumers are not angrier these days but have more ways to express their frustration via social media.
For example, a 27-year-old Californian upset with debit card fees launched a "Bank Transfer Day" campaign on Facebook to urge customers to switch to a nonprofit credit union. And when Netflix announced recently that it was raising fees, a page quickly appeared on Facebook where consumers could complain, Gunia said.
It is not clear whether Bank of America's move Tuesday will be enough to mend fences.
Gunia, who specializes in corporate apologies, said much will depend on the bank's next steps. The statement by the company official was a good start, Gunia says, but the bank needs to say it's sorry and take responsibility for its miscalculation.
Companies that don't can live to regret it.
Netflix caused a stir when it announced it was splitting in two and raising fees. But what really upset consumers, Gunia said, is when the company's top executive indicated in interviews that he didn't care if the move cost the company customers.
"That ignited people's emotions," Gunia said.
Netflix, which lost 800,000 subscribers, later reversed its decision to split the company.
In Baltimore, consumers offered differing views Tuesday about forgiving Bank of America.
"The idea of changing [banks] is still on the table," said Jeremy Johnson, 26, a Bank of America customer.
He said it wasn't just the debit card fee that got him thinking about switching. Bank of America, he said, seems to lead the fight when the government tries to require greater disclosures and consumer protections.
But some are glad that Bank of America blinked, so they don't have to change.
Priscilla Venable, who stopped at an ATM at Lexington Market before working a night shift, said she likes the in-person customer service the bank provides. And her daughter is a teller at a branch in Brooklyn.
Even so, the proposed debit card fee was enough to make her contemplate pulling her money out.
"I thought about changing banks," Venable said. "But … all banks have these issues."
She is relieved that Bank of America decided not to go forward with the fees.
"I think it's because of the customers," she said. "Because the customers have a lot of power. They don't want to lose customers."
Bank of America in Md.
Deposits: $23.73 billion as of June 30
Market share: 20.47 percent, the largest in the state
Offices: 192, including 26 in Baltimore
Source: Federal Deposit Insurance Corp.
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