Bank of America wanted to be transparent on debit card fee

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.

Bank of America, under pressure, drops $5 debit card fee plan

NEW YORK ― Bank of America Corp is dropping plans to charge a $5 monthly fee for debit card use, the bank said in a statement on Tuesday.

The second-biggest U.S. bank said the move was in response to customer feedback and competition. Bank of America was under pressure to make the change as rivals backtracked from plans to charge customers for using their debit cards.

“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, the bank’s co-chief operating officer, said in a statement.

JPMorgan Chase & Co and Wells Fargo & Co last week decided to cancel test programs, while SunTrust Banks Inc and Regions Financial Corp said on Monday they would end monthly charges and reimburse customers.

Bank of America had planned to start charging customers next year. Banks began crafting the monthly charges to make up revenue lost to a law that slashes the fees they charge retailers when consumers swipe their cards. The fees sparked a firestorm of criticism from consumers and politicians, and many smaller banks and credit unions shunned the practice.

Bank of America began softening its stance on the fee last week. The Charlotte, North Carolina, bank planned to give customers more ways to avoid the charge, such as maintaining minimum balances, having a paycheck direct-deposited or using their Bank of America credit card.

The reversal is another embarrassing about-face for Bank of American CEO Brian Moynihan. This spring, he signaled plans for a modest dividend increase this year, only to have the Federal Reserve Board deny the request.