Bank of America Botches Debit Card Fee
Like pretty much everything that has happened on Wall Street since the 2008 crisis,
Bank of America
(BAC - Get Report) never saw it coming.
The bank never realized that its proposal to charge customers a monthly fee of $5 for debit card purchases would result in a nationwide backlash and spark an anti-big bank movement that put BofA's hapless management at the center of the protest.
All the bank was trying to do, as CEO Brian Moynihan put it, was try to make a profit. "I have an inherent duty as a CEO of a publicly owned company to get a return for my shareholders," he told
CNBC's Larry Kudlow. If the Durbin Amendment, which reduced the fees that banks can charge merchants for processing debit card transactions, was going to cost it $2 billion in revenue annually, it had to find a way to recoup some of it.
The company probably figured that, at worst, customers would just switch to cash and stop using debit cards. Maybe the move would even push customers toward credit cards, which are more lucrative for banks.
But Bank of America clearly underestimated the pent-up frustration that was building in customers who were fed up with the bailouts and wrongful home foreclosures. The fact that big banks were playing hard ball on debit fees after they took a taxpayer handout also didn't help.
The $5 fee was the last straw.
Thousands of customers revolted against the proposed fee, threatening to close their accounts with Bank of America and take their business elsewhere. In a
, more than 80% of over 7,000 voters said they would leave the bank.
Readers lashed out at the bank for accepting the government bailout and then proceeding to charge customers for, as they put it, using their own money. An online petition on Change.org protesting the fee caught on like wildfire, gathering 40,000 signatures a day.
The episode also gave rise to the
"Bank Transfer Day"
movement, which urged customers to transfer their money from big banks to smaller community banks and credit unions, which advertised their superior customer service.
In the end, Bank of America was forced to withdraw the unpopular $5 fee. And while industry experts expect the
bank to find a way to charge customers
, BofA is likely to find it increasingly difficult to impose any kind of fee on customers.
The bank certainly cannot afford another fee debacle. Customer loyalties are not what they used to be.
But then neither is customer service.
-- Shanthi Bharatwaj