LAS VEGAS ― Bank of America Corp., which earlier this week canceled plans to charge a $5 monthly fee to use a debit card after loud protests, was not sure how to implement the plan and disclosed it only in an effort to be transparent with customers, a bank executive said.
Laurie Readhead, Bank of America’s retail banking executive, said the bank abandoned the plan because of customer feedback and a broader shift in the market as other banks scrapped debit fee plans.
“We did not now know yet how we were going to do it, but we wanted to put it out there,” she said during a presentation at the ATM, Debit and Prepaid Forum.
News of the fee garnered widespread criticism ranging from angry customers to U.S. President Barack Obama.
As the market shifted, “we shifted,” Readhead said.
Large U.S. banks tested or introduced the fees earlier this year in response to new caps on the amount they can charge merchants for processing debit card transactions.
Known as interchange fees, the charges were capped at 21 cents per transaction — roughly half the previous industry average — by the Durbin amendment to the 2010 Dodd-Frank financial reform law.
Readhead said the industry lost $6 billion to $8 billion in revenue as a result of the new price cap.
As rival banks backed away from such fees, Bank of America initially planned to make it easier for customers to avoid the charges, but on Tuesday it canceled plans for the fee entirely.
The bank in the past has been able to roll out fee hikes that were later embraced by competitors. But in this case, it found itself isolated as other banks shunned the practice or backtracked from their original plans.
The reversal was another embarrassing episode for Chief Executive Officer Brian Moynihan. Last spring, he signaled the bank planned a modest dividend increase this year, only to have the Federal Reserve deny the bank’s request.
New regulations have changed how banks can price their products, and consumers clearly do not want to pay higher fees, Wells Fargo & Co. Chief Financial Officer Tim Sloan said at a separate industry conference on Thursday.